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Orion leased a computer to the Leuox Silver Company on 1 April 20X5. The terms of the lease are as follows: - Lease term (fixed
Orion leased a computer to the Leuox Silver Company on 1 April 20X5. The terms of the lease are as follows: - Lease term (fixed and non-cancellable) 3 years - Estimated economic life of the computer 5 years - Fair market value at lease inception $5,000 ' Bargain purchase offer none - Transfer of title none Guaranteed residual value by iessee, 1 April 20X8 $1,000 - Lessee's normal depreciation method" straight-line - Lessee's incremental borrowing rate 11% - Executory costs included in lease payments none - initial direct costs \"one - Annual lease payment, beginning of each lease year $1,620 - Lessor's implicit interest rate 10% - Lessee's fiscal year-end 31 December * Lenox Silver Company charges a halfyear depreciation in the year of acquisition and a half year in the year of disposition, regardless of the actual dates of acquisition and disposal. Required: 1. Using IFRS, classify the lease from the perspective of the lessee, provide support for your conclusion. 2. Provide entries for the lease from 1 April 20x5 through 31 December 20KB. 3. Show how the leased asset and the lease obligation will be shown on the lessee's balance sheet at 31 December 20KB. The rate implicit in the lease is 13.29% 4. Suppose that at the end of the lease, the lessor tells The lessee to dispose of the asset, and to keep any proceeds in excess of the guaranteed residual value. Provide entries for the lessee on 1 April 20KB, assuming that the lessee sells the asset for $1,200 and remits the required $1,000 payment to the lessor
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