Monterrey Properties enters into a 4-year lease for an automobile to be used in operation. The...
Monterrey Properties enters into a 4-year lease for an automobile to be used in operation. The agreement obligates the company to make lease payments of $10,000 at the end of every year. Its useful economic life would be 8 years. Assume that the company’s borrowing rate is 6%. The PV factor for 4 period, 6%, ordinary annuity is 3.4651.
What expenses will Monterrey record for thefirst year of the lease under IFRS?
| A. |
Depreciation expense for $10,000. |
|
| B. |
Lease expense for $10,000. |
|
| C. |
Depreciation expense for $8,663 and Interest expense for $10,000. |
|
| D. |
Depreciation expense for $8,663 and Interest expense for $2,079. |
Homework Answers
Lease payable =10000*3.4651 = $34651
Interest expense = 34651*6% = $2079
Depreciation = 34651/4 = $8663
Option D. is correct answer.
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