CERTYNEX IFRS ACADEMY

Norvelle has a lease liability of 200,000 at 1 January 20X1, at a rate of 5%, and pays 46,000 every 31 December. It recognised interest of 10,000 in 20X1, and again 10,000 in 20X2, applying 5% to the initial liability. Which finding is correct?

No error: annual interest is fixed once and for all at the commencement date.

20X2 interest is computed on the remaining balance of 164,000, i.e. 8,200.

20X2 interest is computed on the total lease payments still due.

20X2 interest is computed at a rate revised at the end of 20X1, otherwise it is wrong.