Mighty Monster Truck Club (MMTC) acquires Scrappy’s Car Junkyard Company (SCJC) on July 1, 2009. SCJC...

Mighty Monster Truck Club (MMTC) acquires Scrappy’s Car Junkyard Company (SCJC) on July 1, 2009. SCJC is the lessor of various operating assets and thus has a minimum lease payment receivable on its balance sheet. The balance in the lease receivable account is $258,628. The lease involves payments of $5,000 each month for 60 more months at an annual interest rate of 6%. The current market rate of interest is 9%.

? What amounts should MMTC record for the related lease accounts under both US GAAP and IFRS?

Expert Solution

Under IFRS
MLP	Discounting factor per period @ 6%	Period	Discounted MLP
5000	1.005	1	4,975
5000	1.005	2	4,950
5000	1.005	3	4,926
5000	1.005	4	4,901
5000	1.005	5	4,877
5000	1.005	6	4,853
5000	1.005	7	4,828
5000	1.005	8	4,804
5000	1.005	9	4,781
5000	1.005	10	4,757
5000	1.005	11	4,733
5000	1.005	12	4,710
5000	1.005	13	4,686
5000	1.005	14	4,663
5000	1.005	15	4,640
5000	1.005	16	4,617
5000	1.005	17	4,594
5000	1.005	18	4,571
5000	1.005	19	4,548
5000	1.005	20	4,525
5000	1.005	21	4,503
5000	1.005	22	4,480
5000	1.005	23	4,458
5000	1.005	24	4,436
5000	1.005	25	4,414
5000	1.005	26	4,392
5000	1.005	27	4,370
5000	1.005	28	4,348
5000	1.005	29	4,327
5000	1.005	30	4,305
5000	1.005	31	4,284
5000	1.005	32	4,262
5000	1.005	33	4,241
5000	1.005	34	4,220
5000	1.005	35	4,199
5000	1.005	36	4,178
5000	1.005	37	4,157
5000	1.005	38	4,137
5000	1.005	39	4,116
5000	1.005	40	4,096
5000	1.005	41	4,075
5000	1.005	42	4,055
5000	1.005	43	4,035
5000	1.005	44	4,015
5000	1.005	45	3,995
5000	1.005	46	3,975
5000	1.005	47	3,955
5000	1.005	48	3,935
5000	1.005	49	3,916
5000	1.005	50	3,896
5000	1.005	51	3,877
5000	1.005	52	3,858
5000	1.005	53	3,839
5000	1.005	54	3,819
5000	1.005	55	3,800
5000	1.005	56	3,782
5000	1.005	57	3,763
5000	1.005	58	3,744
5000	1.005	59	3,725
5000	1.005	60	3,707
300,000			258,628

Under US GAAP
MLP	Discounting factor per period @ 9%	Period	Discounted MLP
5000	1.0075	1	4,963
5000	1.0075	2	4,926
5000	1.0075	3	4,889
5000	1.0075	4	4,853
5000	1.0075	5	4,817
5000	1.0075	6	4,781
5000	1.0075	7	4,745
5000	1.0075	8	4,710
5000	1.0075	9	4,675
5000	1.0075	10	4,640
5000	1.0075	11	4,605
5000	1.0075	12	4,571
5000	1.0075	13	4,537
5000	1.0075	14	4,503
5000	1.0075	15	4,470
5000	1.0075	16	4,437
5000	1.0075	17	4,404
5000	1.0075	18	4,371
5000	1.0075	19	4,338
5000	1.0075	20	4,306
5000	1.0075	21	4,274
5000	1.0075	22	4,242
5000	1.0075	23	4,211
5000	1.0075	24	4,179
5000	1.0075	25	4,148
5000	1.0075	26	4,117
5000	1.0075	27	4,087
5000	1.0075	28	4,056
5000	1.0075	29	4,026
5000	1.0075	30	3,996
5000	1.0075	31	3,966
5000	1.0075	32	3,937
5000	1.0075	33	3,907
5000	1.0075	34	3,878
5000	1.0075	35	3,849
5000	1.0075	36	3,821
5000	1.0075	37	3,792
5000	1.0075	38	3,764
5000	1.0075	39	3,736
5000	1.0075	40	3,708
5000	1.0075	41	3,681
5000	1.0075	42	3,653
5000	1.0075	43	3,626
5000	1.0075	44	3,599
5000	1.0075	45	3,572
5000	1.0075	46	3,546
5000	1.0075	47	3,519
5000	1.0075	48	3,493
5000	1.0075	49	3,467
5000	1.0075	50	3,441
5000	1.0075	51	3,416
5000	1.0075	52	3,390
5000	1.0075	53	3,365
5000	1.0075	54	3,340
5000	1.0075	55	3,315
5000	1.0075	56	3,290
5000	1.0075	57	3,266
5000	1.0075	58	3,242
5000	1.0075	59	3,217
5000	1.0075	60	3,193
300,000			240,867

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