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A lessee company signed a lease for equipment from a lessor on January 1, Year 1. The lease requires equal rental payments of $40,870
A lessee company signed a lease for equipment from a lessor on January 1, Year 1. The lease requires equal rental payments of $40,870 at the beginning of each year of the term. The PV of the lease payments is $236,600. The company pays all executory costs directly to third parties. The appropriate interest rate is 12.25%. Assume IFRS 16 applies. Both the lessor and lessee have December 31 year ends. How much total expense will be recorded by the lessee in its books in Year 1 in relation to this lease assuming (1) the fair value of the equipment equals the PV of the lease payments and (2) a useful life of eight years? If applicable, include interest, depreciation, and rent in the expense calculation. O a. $50,874 O b. $48,197 . $52,213 O d. $49,536 O e. $53,552
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