under these agreements. Tyre has had to pay a premium to enter into these agreements because of the outlets’
location. Tyre feels that the premiums paid are justifiable because of the increase in revenue that will occur
because of the outlets’ location. Tyre has analysed the leases and has decided that one is a finance lease and
one is an operating lease but the company is unsure as to how to treat this premium. (5 marks)
Required:
A.dvise the directors of Tyre on how to treat the above items in the financial statements for the year ended
31 May 2006.(The mark allocation is shown against each of the above items)
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