ABC plc reached an agreement to lease an item of transportation equipment to be used in its operations for 3 years, from 1st January 2020, with annual payments of 25,000 payable in arrears, the first payment due on 31^st December 2020. ABC plc cannot substitute the equipment, has sole use of the asset for the duration of the contract and operates the equipment.

The appropriate discount rate is 9%. Assume straight-line depreciation with no residual value.

In the income statement as at 31/12/2020, the depreciation charge of DR -------- and the finance charge of DR -------- will be recorded. The Balance sheet will record the current liability of CR -------- and the long-term liability of CR ----------.

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