Maxim Company Leased an Office Under a Five-Year Contract, Which

question 54

Multiple Choice

Maxim Company leased an office under a five-year contract, which has been accounted for as an operating lease. Faced with the downturn in the economy, the viable company decided to sub-lease the office. However, they have had no luck with this effort and the landlord will not allow the lease to be cancelled. The payments are $8,000 per year and there are four years left on the lease. The company's most recent interest rate for financing from a bank is 6%. The risk-free rate on government bonds is 4%. What is the provision for the lease under IFRS?

• A) $29,040
• B) $30,096
• C) $32,000
• D) $27,721

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