Bayler leasing company agrees to lease equipment to Lion corp. on Jan 1, 2019, both Bayler and Lion follow IFRS. The following information relates to the lease agreement:

1. the lease term is 7 years, no renewal,
2. Bayler acquired the equipment this day Jan 1, 2019 for $560,000 cash, the useful life 10 years
3. at the end of the term the equipment to be returned to the Bayler with guaranteed residual value of $40,000
4. the lease agreement require annual rental payments beginning of Jan 1 each yaer
5. Bayler charges 10% on all it is transactions and it is the same rate that Lion can borrow from their Bank.

Questions:

Considering this as Financing type (Capital) Lease, answer the following questions:

1. Calculate the amount of the annual rental (lease) payment
2. If Dec 31 is the fiscal year end for Lion co., prepare the journal entries that Lion would make in 2019 and 2020, Lion did not use reversing entries
3. From the information you have calculated and recorded, identify all balances related to the lease that would be reported on Lion Balance sheet on Dec 31,2020