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LM acquired an asset under a 5-year non-cancellable operating lease agreement on 1 January 20X8. Under the terms of the agreement, LM paid nothing for the first year and then made fourpayments of $50,000 in each subsequent year. LM adopted the provisions of IAS 17 Leases when accounting for this agreement.
Which of the following is correct in respect of this operating lease in LM's financial statements for the year to 31December 20X8?
Suggested Answer: A
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8 comments · newest first
MA
Margart
12 months ago
Definitely not option C, that doesn't add up at all!
HE
Hester
1 year ago
I thought they would recognize some kind of prepayment, but I guess not?
AM
Amie
1 year ago
Wait, how can there be an accrual if they didn't pay anything in year 1?
VI
Vi
1 year ago
I agree, option D makes the most sense here.
LY
Lyndia
1 year ago
The lease payments start in year 2, so only $50k expense for 20X8.
IV
Ivory
1 year ago
I'm a bit unsure about this one. I'll need to think through the key details and see if I can logically determine the correct answer.
DO
Donette
1 year ago
I'm not sure about this one. I'll need to double-check the documentation to make sure I'm not missing anything important.
GO
Goldie
1 year ago
Option C seems like the most logical choice here. The auditor is responsible for the fair presentation of the financial statements, not management.