Herba Corp., which uses IFRS, signs non-renewable, non-cancellable lease agreement to lease robotic equipment from Lu Inc. The following information concerns the lease agreement.

Inception date		1-Jan-20
Lease term		5 years
Fair value of equipment Jan. 1, 2020		$290,000
Economic life of leased equipment		7 years
Annual rental payments starting Jan. 1, 2020		$59,361
Option to purchase at the end of the term		none
Depreciation method		Straight-line
Residual value (Guaranteed)		$16,000
Herbas incremental borrowing rate		6%

1. Calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement.

2. Prepare the journal entries on Herba Corp.s books to record the payments related to this lease for the years 2020 and 2021 as well as any adjusting journal entries at its fiscal year ends of December 31, 2020 and 2021.

3. Calculate the balance of in the lease liability on January 1, 2023 after the annual payment has been made.

4. Assume that a bargain purchase option for $16,000 exists in addition to the information listed above. Calculate the annual depreciation expense.