On January1st,2014,ABC Inc

question 34

Multiple Choice

On January1st,2014,ABC Inc.(the lessor) agrees to lease a piece of specialized piece of machinery to DEF Inc.(the lessee) for 5 years.ABC Inc.is a financial intermediary specializing in leasing arrangements such as the one described below.Details are as follows: Fair value of machinery at inception of the lease: $100,000.
Lease term: 5 years (no bargain renewal terms) .
Executory costs of $10,000 are reimbursed by the lessee.
5 Annual lease payments of $23,000 each are made on January 1^st of each year starting on January 1^st,2014.
Bargain purchase option at end of lease: $5,000.It is estimated that the equipment will have a fair value of $10,000 at the end of the lease.
Economic life of the asset is 10 years,after which the equipment will be worthless.Straight-line depreciation applies.
ABC's implicit interest rate with respect to this lease is 10%.This is rate is known by DEF Inc.
DEF Inc's incremental borrowing rate is 9%.
Assuming that this qualifies as a finance lease,at what amount would DEF Inc.capitalize the leased machinery at the inception of the lease as per IFRS (rounded) ?

• A) $100,000
• B) $100,763
• C) $99,012
• D) $95,907

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Definitions:

Cultural Imperialism Thesis

The theory that suggests dominant cultures exert influence and impose their values, beliefs, and practices on other cultures through media and cultural products.

Western Media Products

Content produced by media companies based in Western countries, characterized by certain cultural viewpoints and values, often contrasted with media from other regions.

Commercialization

Commercialization entails the process of bringing new products or services to the market, focusing on their sale, distribution, and marketing.

Media Globalization

The worldwide integration and expansion of media technologies and networks, enabling the global dissemination and exchange of information and cultural products.