Finance Lease

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November 10, 2016 at 7:27 pm #348385
scarletenergy
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Hello Tutor,

I`m looking at the Q in which there are cash price and present minimum lease payment of machine together. In the answer, finance lease calculation picked up the present value of minimum lease payment.

Can you explain me why we are choosing minimum lease payment instead cash price..
November 11, 2016 at 2:35 am #348404
MikeLittle
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I assume that the present value of the minimum lease payments is lower than the cash price … is that so?

In which case, the rule is that the amount to be capitalised as an asset and to be recorded as a finance lease obligation is that lower figure
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