[Biff-1955-Tannen]

Is there something I’m missing, or why does the first question INCLUDE the next 5 years in the aggregate, while the second question is the aggregate EXCLUDING the next 5 years? What is the correct way?

On July 1, 20X1, South Co. entered into a 10-year operating lease for a warehouse facility. The annual minimum lease payments are $100,000. In addition to the base rent, South pays a monthly allocation of the building’s operating expenses, which amounted to $20,000 for the year ended June 30, 20X2. In the notes to South’s June 30, 20X2, financial statements, what amounts of subsequent years’ lease payments should be disclosed?

A.

$100,000 per annum for each of the next five years and $500,000 in the aggregate

B.

$120,000 per annum for each of the next five years and $600,000 in the aggregate

Correct C.

$100,000 per annum for each of the next five years and $900,000 in the aggregate

D.

$120,000 per annum for each of the next five years and $1,080,000 in the aggregate

Future minimum rental payments required as of the date of the latest balance sheet presented, in the aggregate and for each of the five succeeding fiscal years.

South Co. should disclose a requirement to pay $100,000 during each of the next five years and a total of $900,000.

–

–

–

–

On January 1, Year 1, West Co. entered into a 10-year lease for a manufacturing plant. The annual mini­mum lease payments are $100,000. In the notes to the December 31, Year 2, financial statements, what amounts of subsequent years’ lease payments should be disclosed?

A.

Amount for required period, $100,000; Aggregate amount for period thereafter, $0

B.

Amount for required period, $300,000; Aggregate amount for period thereafter, $500,000

Correct C.

Amount for required period, $500,000; Aggregate amount for period thereafter, $300,000

D.

Amount for required period, $500,000; Aggregate amount for period thereafter, $0

The lessee in a lease context must make disclosures as to future required payments under the lease. One must disclose the payments required under the lease for the next 5 years (here that is 5 × $100,000, or $500,000), as well as disclosing the total amounts to be paid thereafter or $300,000 (the 3 remaining years’ obligations at $100,000 a year).

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[monikernc]

i think it is because of the answers are worded. read through each one again. they say the same thing in different ways.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Biff-1955-Tannen]

Ah ok, I see. Thanks again monikernc

AUD 93 Jan 16
BEC 83 Feb 16
FAR 83 Apr 16
REG 84 May 16

99% Ninja MCQ only

[marqzho]

Because of the wording

let's say the question# 1

$100,000 per annum for each of the next five years and $900,000 in the aggregate

is equal to

Amount for required period, $500,000; Aggregate amount for period thereafter, $300,000

REG 90
FAR 95
AUD 98
BEC 84

[monikernc]

i had to read them several times to finally catch it. tricky tricky stuff

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Author]

Replies