CAF-6 · Chapter 3 · Question 8 of 15
Nova Motors (a dealer) leases a car to a client. The car's cost is Rs. 2M, its fair value is Rs. 2.5M, and the PV of lease payments is Rs. 2.3M. At what amount should Nova Motors recognize 'Sales'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 2,300,000
Explanation
For a manufacturer or dealer lessor, sales revenue is recognized at the lower of the fair value of the asset and the present value of the lease payments. Here, Rs. 2.3M is lower than Rs. 2.5M.
More IFRS 16 Leases MCQs
- Q10In the Statement of Cash Flows, a lessee should classify the principal portion of lease payments as:
- Q11An entity leases an office printer with a new value of Rs. 40,000. The lease is for 3 years. This asset would likely be classified as a:
- Q12At the end of a 4-year lease, a company pays a penalty of Rs. 50,000 because it chose to terminate the lease early as allowed in the…
- Q13What is 'Net investment in the lease' from a lessor's perspective?
- Q14A lessor under an operating lease should recognize lease income: