Assume Red Corp. (a company reporting under IFRS) wants to earn an 4% return on its investment of $600,000 in an asset that is to be leased to Blue Corp. for ten years with an annual rental due in advance each year. How much should Red charge for annual rental assuming there is no purchase option that is reasonably certain to be exercised by Blue Corp.?

A) 189,274 B) 172,073 C) 71,130 D) 73,974

On January 2, 2020, Cruise Ltd. signed a ten-year non-cancellable lease for a heavy-duty drill press. The lease required annual payments of $52,500, starting December 31, 2020, with title passing to Cruise at the end of the lease. Cruise is accounting for this lease as a capital (finance) lease. The drill press has an estimated useful life of 20 years, with no residual value. Cruise uses straight-line depreciation for all its plant assets. The lease payments were determined to have a present value of $352,279, based on an implicit interest rate of 8%. On their 2020 income statement, how much interest expense should Cruise report in connection with this lease?

A) $0 B) 14,091 C) 42,000 D) 28,182

On January 2, 2020, Cruise Ltd. signed a ten-year non-cancellable lease for a heavy-duty drill press. The lease required annual payments of $52,500, starting December 31, 2020, with title passing to Cruise at the end of the lease. Cruise is accounting for this lease as a capital (finance) lease. The drill press has an estimated useful life of 20 years, with no residual value. Cruise uses straight-line depreciation for all its plant assets. The lease payments were determined to have a present value of $352,279, based on an implicit interest rate of 8%. On their 2020 income statement, how much depreciation expense should Cruise report in connection with this lease?

A) 35,228 B) 21,000 C) 17,614 D) 10,500