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(i) On 1 April 2019 GHL purchased an equipment and simultaneously leased it to SG Health Services Ltd (SHS), an unrelated company in Singapore, on

(i) On 1 April 2019 GHL purchased an equipment and simultaneously leased it to SG Health Services Ltd (SHS), an unrelated company in Singapore, on the following terms:

Lease term (with no cancellation clause) 5 years

Remaining useful life of equipment 7 years

Carrying amount and fair value of equipment at 1 April 2019 $918,124

Annual instalment receivable in arrears $225,000

Interest rate implicit in lease (per annum) 10%

Residual value guaranteed by SHS at 31 March 2024 $91,500

Expected residual value at 31 March 2024 $105,000

Question: GHL has treated the contract as an operating lease and recognized lease rental income of $225,000. Depreciation of $131,161 has been charged to the statement of profit or loss.

identify the classification of lease with reason for the lease entered by GHL in accordance with HKFRS 16?

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