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How should lease be accounted for in financial statements

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Question - On 1 April 2009 Bush Co. entered into an agreement to lease a machine that had an estimated life for four years. The lease period is also four years, at which point the asset will be returned to the leasing company. Annual rentals of $5,000 are payable in arrears from 31 March 2010. The machine had a fair value of $14,275 at the inception of the lease. The lessor includes a finance cost of 15% per annum when calculating annual rentals.

Required - How should the lease be accounted for in the financial statements of Bush for the year-end 31 March 2010?

Reference no: EM133189715

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