Problem 2 On December 31, 20):!) an entity sells one of its asset to a leasing company and immediately leases it back. Fair value of asset $1,200,000 Asset's original cost $3,000,000 Accumulated depreciation 2,200,000 Lease term 15 years Economic (and useful) life of asset 15 years Residual value 0 Interest rate implicit in the lease (known to the lessee) 5% Lessee's incremental borrowing rate 5% At the end of the lease term, the asset's ownership reverts back to the lessee. The rst lease payment of $110,105 is due on December 31, 20x0. Required For each of the following, prepare the journal entries relative to this lease transaction at December 31, 20x0 and December 31, 20:11. (a) The lessee is subject to IFRS (b) The lessee is subject to ASPE