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Not Ordinary Drones (NOD), Inc., a lessor, leased a drone to Worldz Information Network, Ltd., [WIN], a lessee, on January 1, 2019. The following information

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Not Ordinary Drones (NOD), Inc., a lessor, leased a drone to Worldz Information Network, Ltd., [WIN], a lessee, on January 1, 2019. The following information relates to the leased asset and the lease agreement: Fair value of leased drone $Undisclosed Lease 10 years Useful life 15 years Payment Due January 1 Payment frequency Annual Annual Instalments starting January 1, 2019 $33,000 Estimated residual value at end of the lease, [as stated in the problem] $23,600 Interest rate implicit in the lease (unknown to the lessee] 7% Interest rate incremental to the lessee 8% Ownership of drone reverts to lessor at end of lease term Year end for both companies December 31 Amortization method Straight line Accounting standards used - NOD ASPE - WIN IFRS REQUIRED: Select the one best answer to each of the questions listed below and input it in the computer. [46] Regardless of your answer in [44] above, assume that NOD classifies the lease as a capital lease. The company operates at a 20% gross profitability rate and sells the drones in the market at a price of $260,000 each. Further assume that the estimated residual value amounting to $23,600 was not guaranteed. Under these assumptions, the journal entry prepared by NOD to record the lease contract on January 1, 2019 would be DEBIT-Lease Receivable [$353,600); DEBIT-Cost of Goods Sold [$ 196,003]; CREDIT-Sales Revenue ($248,003); CREDIT-Inventory [$208,000); CREDIT-Unearned Interest Revenue ($93,600]. b. DEBIT-Lease Receivable ($330,000); DEBIT-Cost of Goods Sold [$208,000); CREDIT-Sales Revenue ($260,000); CREDIT-Inventory [$208,000); CREDIT-Unearned Interest Revenue [$70,000). DEBIT-Lease Receivable ($260,000); DEBIT-Cost of Goods Sold [$208,000); CREDIT-Sales Revenue ($260,000]; CREDIT-Inventory ($208,000). O d. DEBIT-Lease Receivable [$353,500); DEBIT-Cost of Goods Sold [$208,000); CREDIT-Sales Revenue ($260,000); CREDIT-Inventory [$208,000); CREDIT-Unearned Interest Revenue [$93,600]. e. None of the above

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