CMA Final · Strategic Financial Management · Leasing Decisions
A finance lease requires Meera Ltd to pay ₹1,00,000 at the end of each year for 3 years. The asset's fair value at inception is ₹2,48,690 and the implicit rate in the lease is 10%. What is the interest component of the first year's payment?
Interest in the first year is the opening lease liability multiplied by the implicit rate. ₹2,48,690 at 10% gives ₹24,869. The balance of the ₹1,00,000 payment, ₹75,131, reduces the principal.
- A₹24,869Correct
- B₹1,00,000
- C₹75,131
- D₹2,48,690
Explanation
Interest for year 1 = opening liability × implicit rate = 2,48,690 × 10% = ₹24,869. The principal repaid is 1,00,000 − 24,869 = ₹75,131, which is the second option's wrong trap.
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