Carson Heavy Construction Inc. (CHC) entered into a contract to lease an excavator on December 31, 20x0. Information relative to the lease follows: The lease contract is for a 7 year lease with payments due on December 31 of every year with the first payment due December 31, 20x0. The payment includes $2,500 in annual executory costs payable directly to the lessor for maintenance of the excavator. The estimated economic life of the excavator is 10 years. The residual value at the end of the lease term is $50,000 and is guaranteed by the lessee. At the outset of the lease, CHC estimated that the payout on the guarantee would be $20,000 CHC's incremental borrowing rate is 3.5%. It knows that the implicit rate in the lease is 4%. CHC depreciates similar equipment that it owns on a straight-line basis. On December 31, 20x7, CHC returned the excavator to the lessor. The fair value of the excavator was established at $35,000. HIC's year end is December 31 and HIC follows IFRS.

Required - a) What lease payment would be required by the lessor? Assume that the fair value of the excavator is $350,000.

b) Prepare all required journal entries on the lessee's books on the following dates:

- December 31, 20x0

- December 31, 20x1

- December 31, 20x7

c) Repeat part (b) on the assumption that CHC is a private company subject to ASPE.