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Question
1. Five payments of $26,379.74 (a 9% implicit rate) due at the end each year.2. The fair value of the tractor is $100,000.
3. The lease is nonrenewable and the tractor reverts to Star at the end of the lease term.
4. The tractor has a six-year economic life.
5. Hatfield has an excellent credit rating.
6. Star offers no warranty on the tractor other than the manufacturer's two-year warranty that is handled directly with the manufacturer.
Under IFRS, a lessee may classify some assets held under leases as investment property which allows the lessee to
A. Avoid recording depreciation expense for the assets.
B. Account for the assets using either historical cost or fair value.
C. Use the higher of the implicit or the incremental borrowing rate when computing the present value of the minimum lease payments.
D. All of the choices are correct.
Answer
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