Hi can anyone please help me for this task.
Greetings birdie
Company a. tends to buy a new delivery van as at 1.01.2003. The list price is
27,000.00 EUR. The car dealer offers an operating lease contract which is based on 3 years. The lease
payments are 5,600.00 EUR/a. The payments take place at the end of each year.
Company considers financing the van by its house bank. The bank’s interest rate is 4 %/a and is to
be paid at the end of the year. The annuity for the liability is 2,430.00 EUR. Company estimates to
sell the car (van) after 3 years at a price 10,800.00 EUR.
Required: Make all provisional bookkeeping entries for both alternatives and advice
Company in terms of the best alternative. In order to derive the present value of payments
use a weighted average cost of capital rate 8 %/a. Ignore VAT. Follow the regulations of IAS 1 for
the current / non-current distinction of liabilities. Use straight line method in case depreciation
is relevant for your solution.
Greetings birdie
Company a. tends to buy a new delivery van as at 1.01.2003. The list price is
27,000.00 EUR. The car dealer offers an operating lease contract which is based on 3 years. The lease
payments are 5,600.00 EUR/a. The payments take place at the end of each year.
Company considers financing the van by its house bank. The bank’s interest rate is 4 %/a and is to
be paid at the end of the year. The annuity for the liability is 2,430.00 EUR. Company estimates to
sell the car (van) after 3 years at a price 10,800.00 EUR.
Required: Make all provisional bookkeeping entries for both alternatives and advice
Company in terms of the best alternative. In order to derive the present value of payments
use a weighted average cost of capital rate 8 %/a. Ignore VAT. Follow the regulations of IAS 1 for
the current / non-current distinction of liabilities. Use straight line method in case depreciation
is relevant for your solution.