Oakridge Leasing Corporation signs an agreement on January 1, 2020, to lease equipment to Sheridan Limited. Oakridge and Sheridan follow ASPE. The following information relates to the agreement. 1. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years. 2. The asset's fair value at January 1, 2020, is $81,200. 3. 4. 5. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, which is guaranteed. Sheridan Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $950 to Rocky Mountain Insurance Ltd. for insurance and $1,650 to James Township for property taxes. The agreement requires equal annual rental payments of $18,079 to Oakridge, the lessor, beginning on January 1, 2020. 6. The lessee's incremental borrowing rate is 10%. The lessor's implicit rate is 9% and is known to the lessee. 7. Sheridan Limited uses the straight-line depreciation method for all equipment. 8. Sheridan uses reversing entries when appropriate. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.