Mighty Monster Truck Club (MMTC) acquires Scrappy’s Car Junkyard Company (SCJC)
ID: 2509538 • Letter: M
Question
Mighty Monster Truck Club (MMTC) acquires Scrappy’s Car Junkyard Company (SCJC) on July 1, 2009. SCJC is the lessor of various operating assets and thus has a minimum lease payment receivable on its balance sheet. The balance in the lease receivable account is $258,628. The lease involves payments of $5,000 each month for 60 more months at an annual interest rate of 6%. The current market rate of interest is 9%.
? What amounts should MMTC record for the related lease accounts under both US GAAP and IFRS?
Explanation / Answer
Under IFRS MLP Discounting factor per period @ 6% Period Discounted MLP 5000 1.005 1 4,975 5000 1.005 2 4,950 5000 1.005 3 4,926 5000 1.005 4 4,901 5000 1.005 5 4,877 5000 1.005 6 4,853 5000 1.005 7 4,828 5000 1.005 8 4,804 5000 1.005 9 4,781 5000 1.005 10 4,757 5000 1.005 11 4,733 5000 1.005 12 4,710 5000 1.005 13 4,686 5000 1.005 14 4,663 5000 1.005 15 4,640 5000 1.005 16 4,617 5000 1.005 17 4,594 5000 1.005 18 4,571 5000 1.005 19 4,548 5000 1.005 20 4,525 5000 1.005 21 4,503 5000 1.005 22 4,480 5000 1.005 23 4,458 5000 1.005 24 4,436 5000 1.005 25 4,414 5000 1.005 26 4,392 5000 1.005 27 4,370 5000 1.005 28 4,348 5000 1.005 29 4,327 5000 1.005 30 4,305 5000 1.005 31 4,284 5000 1.005 32 4,262 5000 1.005 33 4,241 5000 1.005 34 4,220 5000 1.005 35 4,199 5000 1.005 36 4,178 5000 1.005 37 4,157 5000 1.005 38 4,137 5000 1.005 39 4,116 5000 1.005 40 4,096 5000 1.005 41 4,075 5000 1.005 42 4,055 5000 1.005 43 4,035 5000 1.005 44 4,015 5000 1.005 45 3,995 5000 1.005 46 3,975 5000 1.005 47 3,955 5000 1.005 48 3,935 5000 1.005 49 3,916 5000 1.005 50 3,896 5000 1.005 51 3,877 5000 1.005 52 3,858 5000 1.005 53 3,839 5000 1.005 54 3,819 5000 1.005 55 3,800 5000 1.005 56 3,782 5000 1.005 57 3,763 5000 1.005 58 3,744 5000 1.005 59 3,725 5000 1.005 60 3,707 300,000 258,628 Under US GAAP MLP Discounting factor per period @ 9% Period Discounted MLP 5000 1.0075 1 4,963 5000 1.0075 2 4,926 5000 1.0075 3 4,889 5000 1.0075 4 4,853 5000 1.0075 5 4,817 5000 1.0075 6 4,781 5000 1.0075 7 4,745 5000 1.0075 8 4,710 5000 1.0075 9 4,675 5000 1.0075 10 4,640 5000 1.0075 11 4,605 5000 1.0075 12 4,571 5000 1.0075 13 4,537 5000 1.0075 14 4,503 5000 1.0075 15 4,470 5000 1.0075 16 4,437 5000 1.0075 17 4,404 5000 1.0075 18 4,371 5000 1.0075 19 4,338 5000 1.0075 20 4,306 5000 1.0075 21 4,274 5000 1.0075 22 4,242 5000 1.0075 23 4,211 5000 1.0075 24 4,179 5000 1.0075 25 4,148 5000 1.0075 26 4,117 5000 1.0075 27 4,087 5000 1.0075 28 4,056 5000 1.0075 29 4,026 5000 1.0075 30 3,996 5000 1.0075 31 3,966 5000 1.0075 32 3,937 5000 1.0075 33 3,907 5000 1.0075 34 3,878 5000 1.0075 35 3,849 5000 1.0075 36 3,821 5000 1.0075 37 3,792 5000 1.0075 38 3,764 5000 1.0075 39 3,736 5000 1.0075 40 3,708 5000 1.0075 41 3,681 5000 1.0075 42 3,653 5000 1.0075 43 3,626 5000 1.0075 44 3,599 5000 1.0075 45 3,572 5000 1.0075 46 3,546 5000 1.0075 47 3,519 5000 1.0075 48 3,493 5000 1.0075 49 3,467 5000 1.0075 50 3,441 5000 1.0075 51 3,416 5000 1.0075 52 3,390 5000 1.0075 53 3,365 5000 1.0075 54 3,340 5000 1.0075 55 3,315 5000 1.0075 56 3,290 5000 1.0075 57 3,266 5000 1.0075 58 3,242 5000 1.0075 59 3,217 5000 1.0075 60 3,193 300,000 240,867