1. Finance and Operating Leases

   Trimurti Company has decided to lease its new office building. The following information is available for the lease:

   Payments		$100,000 per year*
   Length of lease		15 years
   Economic life of building		16 years
   Appropriate interest rate		8.4%
   Cost of building if purchased		$875,000

   *The first payment is due at the end of the first year of the lease.

   Required:

   1. Why is this a finance lease rather than an operating lease if the entity reports using IFRS? This is a finance lease because the .

   2. Regardless of your answer to the preceding question, assume that this is a finance lease and that the present value of the lease payments is $816,000. Record the liability and corresponding asset for this acquisition.

   		fill in the blank ee2a6bfddfe2f9b_2
   			fill in the blank ee2a6bfddfe2f9b_4
   	(Record finance lease)

   3. Record the interest expense on the finance lease at the end of the first year. Also assume no residual value and a 15-year lease for the building. Record the first year's straight-line depreciation of the cost of the leased asset. Round your answers to the nearest dollar. For a compound journal entry, for those boxes in which no entry is required, leave the box blank.

   		fill in the blank fcebdcf6604cfc7_2	fill in the blank fcebdcf6604cfc7_3
   		fill in the blank fcebdcf6604cfc7_5	fill in the blank fcebdcf6604cfc7_6
   		fill in the blank fcebdcf6604cfc7_8	fill in the blank fcebdcf6604cfc7_9
   	(Record finance lease payment)
   		fill in the blank fcebdcf6604cfc7_11
   			fill in the blank fcebdcf6604cfc7_13
   	(Record depreciation expense)