Wong Inc., the lessee, entered into two leases on July 1, 2023, with Pomerleau Corp. Both companies are public corporations following IFRS. The leases are for a large auger and a jackhammer that will be used on a construction site, and both parties would prefer to keep the accounting for each as simple as possible. Other relevant information is as follows:

1. The term of the lease for the auger is six months with a monthly cost of $2,500 per month beginning July 1, 2023, with full payment of $15,000 due July 1, 2023. The lease for the jackhammer is for 18 months at $100 per month, with full payment of $1,800 due July 1, 2023.

2. Pomerleau offered Wong the opportunity to purchase the auger for $36,500 and the jackhammer for $4,000. Wong chose to lease both instead.

3. The useful life of the auger and jackhammer are both three years with no residual value.

4. The stated interest rate for comparable leases is 6%.

Instructions

a. Discuss the suggested basis of accounting for the two leases for both the lessor and lessee.

b. Prepare the journal entries for both parties on July 1 and December 31, 2023.

c. What financial statement disclosures relative to these leases should be provided by both parties for the jackhammer lease at their December 31, 2023 year ends?

d. Assume now that Wong follows ASPE. Prepare the journal entries for Wong on July 1 and December 31, 2023, for both leases.