Alpine Ltd Signed a 10-Year Non-Cancellable Lease with Mt Buller

Alpine Ltd signed a 10-year non-cancellable lease with Mt Buller Ltd for the use of high-tech equipment.No bargain purchase option is provided in the lease contract.The following information is available: $$\begin{array} { | l | r | } \hline \text { Fair value of equipment } & \$ 200000 \\\hline \text { Economic life of the equipment } & 12 \text { years } \\\hline \text { Minimum lease payments } & \$ 120000 \\\hline \text { Executory costs } & \$ 5,000 \\\hline\end{array}$$ What is the amount to be recorded as an asset and a liability in the books of the lessee that is in accordance with IAS 17 Leases?

A) $0
B) $120 000
C) $125 000
D) $200 000

Correct Answer:

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