GreatRide (GR) is in the business of manufacturing and selling high-end vehicles. GR signs a deal with the CEO of a consulting firm for a luxury SUV. You are the long time Controller for GreatRide (GR) Ltd). You will need to understand what the impact of that contract will be on the books. GR has a Year-End of December 31. The lease is a 5-year arrangement at the end of which there is a residual value of $10,000. The consulting firm had to pay $5,000 to a broker to find the vehicle and facilitate the deal. The Vehicle identification number (VIN) of the SUV is XX2233BB00. During the lease term, the consulting firm has exclusive use of the car and can direct its use. The consulting firm has the option to buy the car for $10,000 at the end of the lease term. The remaining economic life of the car at the time of signing the lease is 6 years. GR has a 16% incremental borrowing rate and sets the equal annual rentals to ensure a 4% rate of return. The vehicle was worth $150,000 when GR manufactured it. You purchase an online appraisal on this vehicle and learn that it now has a Fair Market Value of $100,000. It was manufactured and paid for in cash at that time and has not been leased since its manufacture. The lease was signed on January 1, 2021 and payments are to be received on that date annually for the duration of the lease. GR has a policy where the residual value on any of their lease vehicles are to be guaranteed by the lessee. The collectability of the lease payments is not reasonably predictable and there are no important uncertainties about any un-reimbursable costs that have not yet been incurred by the lessor. GR, which is a publicly listed Company (TSX) uses the straight-line amortization for all the cars on its books. Required

1. What is the minimum rental payment (MRP) included in the lease contract between GR and the consulting firm?

2. Classify the lease as finance or operating lease. Evaluate each applicable classification criterion for the lessor.

3. Prepare the lease amortization schedule for any finance lease.

4. Prepare all necessary journal entries in GRs books for that SUV for the 2021 year.