On January 1, 2017, Lavery Corp , which follows ASPE, leased equipment to Oriole Ltd , which follows IFRS 16 Both Lavery and Oriole have calendar year ends The following information concerns this lease 1 The term of the non cancellable lease is six years, with no renewal option The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,600 Oriole Ltd depreciates all its equipment on a straight line basis 2 Equal rental payments are due on January 1 of each year, beginning in 2017 3 The equipments fair value on January 1, 2017 is $155,000 and its cost to Lavery is $111,000 4 The equipment has an economic life of seven years 5 Lavery set the annual rental to ensure a 11 rate of return Orioles incremental borrowing rate is 12 and the lessors implicit rate is unknown to the lessee 6 Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor (b) Using a financial calculator, calculate the amount of the annual rental payment (Round factor values to 5 decimal places, e g 1 25124 and final answer to 0 decimal places, e g 5,275 )

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On January 1, 2017, Lavery Corp., which follows ASPE, leased equipment to Oriole Ltd., which follows IFRS 16. Both Lavery and Oriole have calendar year

On January 1, 2017, Lavery Corp., which follows ASPE, leased equipment to Oriole Ltd., which follows IFRS 16. Both Lavery and Oriole have calendar year ends. The following information concerns this lease.

1.		The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,600. Oriole Ltd. depreciates all its equipment on a straight-line basis.
2.		Equal rental payments are due on January 1 of each year, beginning in 2017.
3.		The equipments fair value on January 1, 2017 is $155,000 and its cost to Lavery is $111,000.
4.		The equipment has an economic life of seven years.
5.		Lavery set the annual rental to ensure a 11% rate of return. Orioles incremental borrowing rate is 12% and the lessors implicit rate is unknown to the lessee.
6.		Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor.

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(b)

Using a financial calculator, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.)