Question
37 Gail's Riding Academy (GRA) reports its financial results in accordance with IFRS. On January 1, 20X1, GRA, the lessee, entered into an agreement to
37 Gail's Riding Academy (GRA) reports its financial results in accordance with IFRS. On January 1, 20X1, GRA, the lessee, entered into an agreement to lease equipment from the lessor for a six-year period. The required payment on the lease is $20,000 per annum, first due on January 1, 20X1, the commencement day of the agreement. The lessee'must return the equipment to the lessor at the end of the lease term. GRA guarantees the lessor that the equipment will be worth at least $18,000 at the end of the lease, the expected payout under the guarantee is $12,000. The useful life of the equipment is estimated to be eight years. The implicit rate in the lease is 4% per annum, which is readily determinable by GRA. GRA's incremental borrowing costs for transactions of this type are 5% per annum. What amount should GRA record as a lease liability on inception of the lease? Oa. $103,262 Ob. $98,520 Oc. $95,544 Od. $118,520
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