On 28 February 2015 Makhafola Ltd leased a building located in Pretoria CBD to Thato Ltd for a period of 35 years. ThatoLtd will pay Makhafola Ltd annual rental payments of R500 000 for the building and has an option of buying the buildingafter the 35 years. Generally buildings of the same nature in Pretoria CBD are estimated to have an economic life of 40years. The fair value of the building on 28 February 2015 was R420 000. Makhafola Ltd incurred R12 500 as costs for legalconsultancy in drafting the lease. The applicable interest rate at the same date was 10% per annum. What is the class ofthe lease between Makhafola Ltd and Thato Ltd? Select one: a. General lease. b. Perpetual lease. c. Operating lease. d. Finance lease
On 28 February 2015 Makhafola Ltd leased a building located in Pretoria CBD to Thato Ltd for a period of 35 years. ThatoLtd will pay Makhafola Ltd annual rental payments of R500 000 for the building and has an option of buying the buildingafter the 35 years. Generally buildings of the same nature in Pretoria CBD are estimated to have an economic life of 40years. The fair value of the building on 28 February 2015 was R420 000. Makhafola Ltd incurred R12 500 as costs for legalconsultancy in drafting the lease. The applicable interest rate at the same date was 10% per annum. What is the class ofthe lease between Makhafola Ltd and Thato Ltd?
Select one:
a.
General lease.
b.
Perpetual lease.
c.
Operating lease.
d.
Finance lease
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