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Snow plc was not able to afford $20M cash price, to acquire the equipment needed so a six-year finance lease agreement due to expire
Snow plc was not able to afford $20M cash price, to acquire the equipment needed so a six-year finance lease agreement due to expire on 31 March 2020 was negotiated. Snow plec tried to negotiate with the lessor about the implicit interest rate, but the lessor was not prepared to reduce the rate below 10%. To make matters worse for Snow plc, the lessor had demanded a deposit of $4,850,000 with further annual payments of $4M payable on each successive 1 April for 5 years commencing 1 April 2015. Required: At what value should Snow plc record the non-current liability in respect of this lease as at 31 March 2016. Show all workings. (14 marks)
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