Long Ltd., a private corporation adhering to ASPE, enters into a non-cancellable lease agreement on July 1, 2020, to lease equipment from Fong Ltd. Granny Limited is the largest manufacturer of adult diapers

in North America, and is located Mississauga, Ontario. You are the Controller of the organization and as CPA provide accounting analysis and recommendations to the CEO. No accounting has been done for the

lease agreement in the 2020 financial statements and the CEO is keen to learn how the lease will impact the Company's results.

The following data are relevant to the lease agreement:

1. The term of the lease is 4 years, with no renewal option. Payments of $ 126,807 are due on June 30 of each year, with the first payment due June 30, 2021.

2. The fair value of the equipment on July 1, 2020 is $ 420,000. The equipment has an economic life of 6 years with no residual value.

3. Long depreciates similar equipment it owns on the double declining-balance basis.

4. Long's incremental borrowing rate is 10%. The lessee is aware that the lessor used an implicit rate of 8% in calculating the lease payments.

5. Present value factor for 4 periods at 8% is 3.31213; at 10%, 3.16986.

In addition to the new lease, Granny Limited has a defined benefit pension plan related to some of its more senior manufacturing employees. Granny Limited ceased allowing new employees to enter the plan, but does have a large number of employees who are still active.

The actuary for Granny Limited has developed the following information regarding the company's defined benefit pension plan for calendar 2020:

Service cost $600000

Actual return on plan assets 315000

Contributions 1080000

Benefits paid to retirees 72000

Interest (discount) rate 10%

In your report to the CEO on accounting issues, please include any adjustments related to the pension plan, along with your analysis of how well funded this plan is and if there are any risks to the Company related to underfunding.