The following facts are for a non-cancellable lease agreement between Hebert Corporation and Russell Corporation, a lessee:

Inception date	July 1, 2020
Annual lease payment due at the beginning of each year, starting July 1, 2020	$20,066.26
Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell	$4,500.00
Lease term	5 years
Economic life of leased equipment	10 years
Lessor's cost	$60,000.00
Fair value of asset at July 1, 2020	$88,000.00
Lessor's implicit rate	9%
Lessee's 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 Hebert use IFRS 16.

Instructions

Answer the following, rounding all numbers to the nearest cent.

a.

Calculate the amount of the right-of-use asset and lease liability. Show calculations using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel functions.

b.

Discuss the nature of this lease to Russell Corporation, the lessee.

e.

Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Russell's annual accounting period ends on December 31, and Russell does not use reversing entries.