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Hello, could you pls help me with this question:
On 1 January 20X6 Platinum entered into a finance lease agreement. The cash price of the asset was $360,000 and the terms of the lease were a deposit of $120,000 payable on 1 January 20X6 and three further instalments of $100,000 payable on 31 December 20X6, 31 December 20X7 and 31 December 20X8. The rate of interest implicit in the lease is 12%.
What will be the amount of the finance charge arising from this lease which will be charged to profit or loss for the year ended 31 December 20X7?
I don’t understand why we subtract Deposit from Cash price? Thank you.
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