a.) McLeans farm has leased a refrigerator from Indi Equipment. There was an upfront payment of $6,000 as executory cost and an annual equal payment of $5,000 starting from the end of May 2022 for ten years. The lease commences today the 27^th of May 2021 for a duration of ten years. The life of the truck is 12 years and is expected to have a residual value of 10,000 at the end of the lease. The fair value of the leased asset is at the date of the lease inception. Calculate the interest rate implicit in the lease if the current value of the truck is $40,578 (10 marks)

b.)Explain whether or not this lease is a finance or operating lease based on the number of years of the lease relative to the life of the asset? (2.5 marks)

c.)What do you understand by the residual or scrap value of an asset? (2.5 marks)

(Hint: Use the present value factor and present value of an annuity factor tables to do the calculations.)