Maxim Company leased an office under a five-year contract, which has been accoun
ID: 2470141 • Letter: M
Question
Maxim Company leased an office under a five-year contract, which has been accounted for as an operating lease. Faced with the downturn in the economy, the viable company decided to sub-lease the office. However, they have had no luck with this effort and the landlord will not allow the lease to be cancelled. The payments are $8,000 per year and there are four years left on the lease. The company's most recent interest rate for financing from a bank is 6%. The risk-free rate on government bonds is 4%. What is the provision for the lease under IFRS?
A) 30,096
B) 29,040
C) 32,000
D) 27,721
Explanation / Answer
We have to find the present value of lease of 4 years and each year the payment o $8000 at 6% rate
=pv(6%,4,-8000,,0)=$27,721
option D