[mangos]

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Kinda lost on this MCQ.

From my understanding it’s an IFRS Finance lease.

My question is: why are they depreciating (and not amortizing) the lease cost? Why aren’t they using the effective interest rate?

Also, why do they ignore the $50k payment made in year 1?

FAR (5/07/13): 96

[lbi18]

The company has to depreciate the leased asset on a S/L basis – the effective interest method is used to account for the lease liability and related interest, not the asset.

So, the $50K payment is not ignored per say, it just doesn't apply to the question at hand.

FAR - 85
AUD - 99
REG - 85
BEC - 10/4/13 (Waiting)

Using Becker Self-Study

[mangos]

Ahhh crap.. it's been a long day, hahah.

I see, it's the *ASSET* and not the *LIABILITY* it's asking for.

Thanks for pointing that out!

FAR (5/07/13): 96

[lbi18]

No worries, I'm pretty sure we've all done this before.

And yes, it has been a long day haha

FAR - 85
AUD - 99
REG - 85
BEC - 10/4/13 (Waiting)

Using Becker Self-Study

[Author]

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