Fields Finance Ltd. (FFL), a leasing company that reports under ASPE, is in the process of preparing its financial statements for the year ended June 30, Year 1.

The following leases were entered into:

Lease 1: On February 1, Year 1, the company entered into a lease contract in respect of plant and machinery for a production line. The details are as follows:

12 quarterly rental payments: $ 11,000 (first payment on April 30, Year 1)

Period of contract: 3 years (from February 1, Year 1) Fair value of equipment (cost to FFL): $200,000

Guaranteed residual value end of lease term: $ 60,000 Estimated residual value end of useful life: $ 20,000

Economic life: 8 years

Implicit rate: 12%

Lease 2: On April 1, Year 1, the company entered into a lease contract in respect of a fleet of distribution vehicles. This lease involves the following payments:

Initial rental payment: $ 30,000 (due April 1, Year 1) 10 quarterly rental payments: $ 6,000 (first payment due on July 1, Year 1) Period of contract: 3 years (from April 1, Year 1) Fair value of equipment (cost to FFL): $190,000

Unguaranteed residual value end of lease term: $120,000 Estimated residual value end of useful life: $ 60,000

Economic life: 6 years

Implicit rate: 12%

FFL depreciates all its equipment under operating leases on a straight-line basis.

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I want to know when we calculate the PV of the lease, what amount should we use as the FV in both lease? Should we use the residual value at the lease term or the residual value at the end of the useful life?

And how to calculate the PV in lease 2? As there is a lump sum payment.