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Swifty Dairy Ltd , Ieases its milk cooling equipment from Blue Spruce Finance Corporation. Both companies use IFRS. The lease has the following terms: The
Swifty Dairy Ltd Ieases its milk cooling equipment from Blue Spruce Finance Corporation. Both companies use IFRS. The lease has the following terms:
The lease is dated May with a lease term of elght years. It is noncancellable and requires equal rental payments of $ due each May beginning in
The equipment has a fair value and cost at the inception of the lease of $ an estimated economic life of years, and a residual value which is guaranteed by Swifty Dairy of $
The lease contains no renewal options and the equipment reverts to Blue Spruce Finance on termination of the lease.
Swifty Dairy's incremental borrowing rate is per year: the implicit rate is also
Swifty Dairy uses straightline depreciation for similar equipment that it owns.
Collectibility of the payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor.
Click here to view the factor table PRESENT VALUE OF
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
Using tables, a financial calculator, or Excel functions, calculate the PV of the lease payments and guaranteed residual value under the lease. Round factor values to decimal places, eg and final answer to decimal places, eg
PV of the lease payments and guaranteed residual value.
$
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