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The legal life is five years but can be renewed at 5000 for

Problem

Archive bhd acquired a franchise on finance lease. it is required to pay 200000 per annum in advance for five years. the implicit interest rate is 10%. the franchise could be bought for 800000. The legal life is five years but can be renewed at 5000 for another five years. Discuss the accounting treatment for the franchise.

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Accounting Basics: The legal life is five years but can be renewed at 5000 for

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