On January 1, Year 7, Dallas Corp. leases a truck they have manufactured to Valley Corp. The interest rate for the lease is 5%. The lease is for 5 years, and the sales price of the truck is $260,000. It cost Dallas Corp. $180,000 to manufacture the truck. Payments will be received at the beginning of the year, starting January 1, Year 7. At the end of the lease, Valley Corp. will keep the truck. Dallas Corp. follows IFRS.

Required

Complete the following with the details provided above.

A.What type of lease is this for the lessor? Justify your answer in one or two sentences.

B.Calculate the annual January 1 lease payment that will allow Dallas to earn a 5% return on the lease.

C.Prepare a lease amortization schedule for the lessor, Dallas Corp., for the full term of the lease. Use exact dollars and cents. To do this efficiently, you should prepare the amortization schedule on Excel and then copy it into your Word document.

D.Prepare all the journal entries for Dallas Corp. related to the lease for Years 7 and 8. Round journal entry amounts to the nearest dollar.