In Circumstances Where the Lessee Is Unable to Determine the Implicit

question 62

Multiple Choice

In circumstances where the lessee is unable to determine the implicit interest rate in a lease agreement,AASB 117 requires the lessee to use.

• A) The incremental lending rate of the lessor.
• B) The weighted average cost of capital of the lessee.
• C) The incremental borrowing rate of the lessee.
• D) The internal rate of return on similar projects adopted by the lessor.
• E) None of the given answers.

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Definitions:

Interest Allowances

Financial incentives or reductions in interest payments designed to encourage borrowing or to alleviate the burden of interest costs.

Salary Allowances

Fixed amounts paid to employees in addition to their regular salary to cover specific needs or expenses, such as travel or living expenses.

Withdrawal

The act of removing funds from a bank account or the process of taking assets out of a business by its owner for personal use.

Partnership Assets

Assets owned by a partnership that are used for carrying out its business activities.