Question
The following facts are for a non-cancellable lease agreement between Sunland Corporation and Russell Corporation, a lessee: Inception date July 1, 2023 Annual lease payment
The following facts are for a non-cancellable lease agreement between Sunland Corporation and Russell Corporation, a lessee:
| Inception date | July 1, 2023 | ||
|---|---|---|---|
| Annual lease payment due at the beginning of each year, starting July 1, 2023 | $20,644.11 | ||
| Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell | $3,500.00 | ||
| Lease term | 5 years | ||
| Economic life of leased equipment | 10 years | ||
| Lessors cost | $55,600 | ||
| Fair value of asset at July 1, 2023 | $89,800 | ||
| Lessors implicit rate | 9% | ||
| Lessees incremental borrowing rate | 9% | ||
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor. The lessee assumes responsibility for all executory costs. Both Russell and Sunland use IFRS 16. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.
(b)
Calculate the amount of gross investment at the inception of the lease. (Round answers to 2 decimal places, e.g. 52.75.)
| Gross investment | $enter the gross investment in dollars |
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Auditing A Practical Approach
Authors: Robyn Moroney
1st Canadian Edition
978-1118472972, 1118472977, 978-1742165943
