Question

In computing the present value of the lease payments, the lessee should a.use both its incremental borrowing rate and the implicit rate of the lessor, assuming that the implicit rate is less. b.use the implicit rate of the lessor, assuming that the implicit rate is known to the lessee. c.use its incremental borrowing rate in all cases. d.use the implicit rate if it is less than then lessee’s incremental borrowing rate.

Answer 1

Answer:

The answer is  "Option a"

Explanation:

This payment is equivalent to the regular rent formally specified by the same contract that grants the member the rights for a specified time. It used both the nominal lending rate and the lessor's conditional value,  which provides the lower implied rate, and wrong choices can be described as follows:

• In option b, It is wrong because in this we assume the implicit rate is lessee.

• Option c and Option d both were wrong because It doesn't use the Iterative credit rate.