An asset with a useful life of four years is to be leased for four years at an annual cost of $2 000 payable annually in arrears. The cash price of the asset is $5 710.

Required:

i.Recognise the finance income receivable each year on the basis that the lessee recognises the finance charge payable. Use the sum of digit method to apportion your interest.(4 Marks)

ii.Recognise $5 710 value of the asset a receivable (investment in finance lease)(4 Marks)

iii.Confirm that the terms of the lease satisfy the conditions to be a finance lease.(2 Marks)