The fleet lessor Quarzo provides a refrigerated truck to a carrier under a three-year finance lease. Payments of 70,000 are made in arrears, at the end of each year. Quarzo uses an unguaranteed residual value of 10,850 at the end of the lease. The interest rate implicit in the lease is 5 % and the initial net investment is 200,000. What is the unearned finance income at the commencement date, and what finance income will Quarzo recognise for the third year?
- Initial net investment
- 200,000
- Interest rate implicit in the lease
- 5 %
- Annual payment in arrears
- 70,000
- Unguaranteed residual value
- 10,850