The Following Information Relates to Questions

The following information relates to questions
Adam Limited and Davies Limited enter into a finance lease agreement with the following terms:

? lease term is 3 years
? estimated economic life of the leased asset is 6 years
? 3 × annual rental payments of £23 000 each payment is one year in arrears
? residual value at the end of the lease term is not guaranteed by the lessee
? interest rate implicit in the lease is 7%.

-The period over which the asset should be depreciated by the lessee is:

A) 3 years;
B) 6 years;
C) the rate as determined by the tax authorities;
D) cannot be determined from the information provided.

Correct Answer:

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