Accounting & the 3 Statements
Year 1 of a finance lease: $100 initial lease liability and ROU asset, 6% discount rate, 5-year term, annual payment $23.74. Walk me through the three statements (25% tax).
Model answer
Income statement: interest = 6% × $100 = $6.00; straight-line ROU amortization = $100/5 = $20 → total pre-tax expense $26; net income −$26 × (1 − 25%) = −$19.50. Cash flow statement: start NI…
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