Alpine Ltd signed a 10-year non-cancellable lease with Mt Buller Ltd for the use of high-tech equipment.No bargain purchase option is provided in the lease contract.The following information is available: $$\begin{array} { | l | r | }
\hline \text { Fair value of equipment } & \$ 200000 \
\hline \text { Economic life of the equipment } & 12 \text { years } \
\hline \text { Minimum lease payments } & \$ 120000 \
\hline \text { Executory costs } & \$ 5,000 \
\hline
\end{array}$$ What is the amount to be recorded as an asset and a liability in the books of the lessee that is in accordance with IAS 17 Leases?

Question

Alpine Ltd signed a 10-year non-cancellable lease with Mt Buller Ltd for the use of high-tech equipment.No bargain purchase option is provided in the lease contract.The following information is available: $$\begin{array} { | l | r | } 
\hline \text { Fair value of equipment } & \$ 200000 \
\hline \text { Economic life of the equipment } & 12 \text { years } \
\hline \text { Minimum lease payments } & \$ 120000 \
\hline \text { Executory costs } & \$ 5,000 \
\hline
\end{array}$$ What is the amount to be recorded as an asset and a liability in the books of the lessee that is in accordance with IAS 17 Leases?

Quizplus · Accepted Answer

The amount to be recorded as an asset and a liability in the books of the lessee is $125,000. This is the present value of the minimum lease payments, which is $120,000, plus the executory costs, which is $5,000.

Alpine Ltd Signed a 10-Year Non-Cancellable Lease with Mt Buller