Question 2 (27 marks) Long Ltd., a private corporation adhering to ASPE, enters into a non-cancellable lease agreement on July 1, 2017, to lease equipment from Fong Ltd. The following data are relevant to the lease agreement: 1. The term of the lease is 4 years, with no renewal option. Payments of $117,413.65 are due on July 1 of each year, with the first payment due on the date the lease is signed. The fair value of the equipment on July 1, 2017 is $420,000. The equipment has an economic life of 6 years with no residual value. 2. Long depreciates similar equipment it owns on a double declining-balance basis. Long's incremental borrowing rate is 10%. The lessee is aware that the lessor used an implicit rate of 8% in calculating the lease payments. 3. 4. 5. Long has a fiscal year end on December 31. Instructions a) What type of lease is this for Long? What is your rationale? (6 marks) c) Prepare the journal ennies on long a books that relate to the ease agme July 2017 December 31, 2017 May 1, 2018 cember 31, 2018 Line Man

Question 2(27marks) Long Ltd., a private corporation adhering to ASPE, enters into a non-cancellable lease agreement on July 1,20017 to the lease agreement: to lease equipment from Fong Ltd. The following data are relevant 1. The term of the lease is 4 years, with no renewal option. Payments of $117,413.65 are due 2n July 1 of each year, with the first payment due on the date the lease is signed. economic life of 6 years with no residual value. 3. Long depreciates similar equipment it owns on a double declining-balance basis. 4. Long's incremental borrowing rate is 10%. The lessee is aware that the lessor used an implicit rate of 8% in calculating the lease payments. 5. Long has a fiscal year end on December 31. Instructions a) What type of lease is this for Long? What is your rationale? ( 6 marks)