Problem 10-30 (IFRS) At the beginning of current year, Southstar Company leased a building with the following information: Annual fixed payment in advance at the beginning of each lease year 1, 000, 000 Initial direct cost paid 350, 000 Least incentive received 150, 000 Lease bonus paid to lessor before commencement of lease 100, 000 Discounted amount of restoring the building as required by contract 200, 000 Purchase option that is not reasonably certain to be exercised 300, 000 Lease term 5 years Useful life of building 8 years Implicit interest rate 8% Present value of an annuity of 1 in advance at 8% for 5 periods 4.31 Present value of 1 at 8% for 5 periods .68 1. What is the initial lease liability? a. 4, 514, 000 b. 4, 310, 000 c. 4, 614, 000 d. 4, 764, 000 2. What is the cost of right of use asset? a. 4, 814, 000 b. 4, 810, 000 c. 4, 710, 000 d. 4, 610, 000
Problem 10-30 (IFRS)
At the beginning of current year, Southstar Company leased a building with
the following information:
Annual fixed payment in advance at the beginning of each lease year
1, 000, 000
Initial direct cost paid
350, 000
Least incentive received
150, 000
Lease bonus paid to lessor before commencement of lease
100, 000
Discounted amount of restoring the building as required by contract
200, 000
Purchase option that is not reasonably certain to be exercised
300, 000
Lease term 5 years
Useful life of building 8 years
Implicit interest rate 8%
Present value of 1 at 8% for 5 periods .68
1. What is the initial lease liability?
a. 4, 514, 000
b. 4, 310, 000
c. 4, 614, 000
d. 4, 764, 000
2. What is the cost of right of use asset?
a. 4, 814, 000
b. 4, 810, 000
c. 4, 710, 000
d. 4, 610, 000
Step by step
Solved in 3 steps
