1. It is January 1, 2021 and Ayla Ltd. (Ayla) just signed a five-year lease with Richard Company (RC) for equipment that will be used in Aylas operations. The annual payments of $64,000 are required to be paid at the beginning of each year. The equipments fair value at the inception of the lease is $320,000. The equipment has an estimated useful life of eight years and no residual value. Ayla pays all the executory costs directly to third parties. RC has decided they want to earn an annual rate of return of 8% and Ayla is aware of this fact. The lease does not transfer title or contain a bargain purchase option. Both Ayla and RC have December 31 year ends.

Required (21 marks):

1. Determine the nature of the lease assuming Ayla follows IFRS.
2. Would the nature of the lease change if Ayla followed ASPE? Explain.
3. Prepare all the journal entries Ayla would record in 2021 under IFRS. (Please date your entries. You can ignore executory costs.)
4. Prepare all the journal entries Ayla would record in 2021 under ASPE. (Please date your entries. You can ignore executory costs.)