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Buffalo Corp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease equipment from Labelle Ltd. The following information concerns the lease agreement.
Buffalo Corp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease equipment from Labelle Ltd. The following information concerns the lease agreement. 1. The equipment's fair value on July 1, 2020 is $275,000. 2. The agreement requires equal rental payments of $57,700 beginning on July 1, 2020. 3. 4. 5. 6. The equipment has an estimated economic life of 5 years, with an unguaranteed residual value of $77,300. Buffalo Corp. depreciates similar equipment using the straight-line method, with no residual value. The lease is non-renewable. At the termination of the lease, the equipment reverts to Labelle. Buffalo's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Buffalo Corp. The yearly rental payment includes $2,976.52 of executory costs related to insurance on the equipment. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
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