Shiba Co entered into a non-cancellable four-year operating lease to hire a photocopier on 1 January 20X7. The terms of the lease agreement were as follows:
Operating lease rental $5,000 per annum
Cash back incentive received at the start of the lease $1,000
Useful life of the asset Eight years
What is the charge in the statement of profit or loss of Shiba Co for the year ended 31 December 20X7 in respect of this operating lease?
Net total being paid over four years (($5,000 x 4 years) – $1,000) 19,000
Annual charge spread evenly over the lease term ($19,000/4 years) 4,750