On Jan 1, 2017, Mickey Inc enters into a 7 year, non cancellable lease with Minnie Ltd for machinery having an estimated useful life of 9 years, and a fair value of $4,300,000. Minnie's implicit rate is 6%. Mickey using the straight-line depreciation method to depreciate assets. Mickey will make annual lease payments on Jan. 1 of each year. The lease includes a guarantee by Mickey Inc. that Minnie Ltd will realize $100,000 for selling the asset at the expiration of the lease. Both companies adhere to IFRS 16.

Required:

1. Calculate the lease payment Minnie Ltd. will charge Mickey (assuming no mark-up on the machinery from fair value).
2. Calculate the present value of the lease payments.
3. What kind of lease is this to Mickey Inc.? Why?
4. Present the journal entries that Mickey Inc. would record during the first year of the lease. Round to the nearest dollar.