. Rabbit Co has 2 options to acquire a new machine with an estimated useful life of 6 years. It can buy it today, the 1st January 20X3 at a cash price or it can lease the asset under the following agreement:

Fair value of the asset - $100,000

An initial payment of $13,760 will be payable straight away

5 further annual payments of $20,000 will be due, beginning on 1st Jan 20X3

The interest rate implicit in the lease is 8%

If Rabbit decides to lease the asset, what will be recorded in its financial statements at the y/e 31 December 20X4 in respect of the lease liability?

Finance cost Non-current liability Current liability

A 4,123 35,662 20,000

B 5,299 51,539 20,000

C 5,312 51,712 20,000

D 5,851 43,709 15,281