White Rock Limited (WRL) has just entered into a lease agreement with Downtown Custom-works Limited (DCL) as detailed in question #1. The lease agreement disclosed the implicit rate applied to the lease by DCL. WRL's borrowing rate is 4%. WRL depreciates capital assets on a straight line basis.

Required #1

Provide entries required by WRL at the inception of the lease on June 1, 2018 and December 31, 2018.

Can WRL apply its borrowing rate in capitalizing the lease? Why or why not?

Required #2

Prepare, in good form (properly classified), an excerpted Statement of Financial Position for White Rock Limited as at December 31, 2018, its financial year end.

White Rock Limited

Statement of Financial Position (partial)

As at December 31, 2018

Required #3:

For WRL, what would have been the value (provide amount) capitalized of the Right-to-use Asset if the lease agreement contained a Bargain Purchase Option (BPO) for $88,000?

What would have been the associated depreciation charge (calculate amount) for year ended December 31, 2018?

Required #4:

For WRL, What would have been the value capitalized of the Right-to-use Asset if the lease agreement was closed end and contained an Unguaranteed Residual clause for $88,000? Calculate amount.

What would have been the associated depreciation charge (caloculae amount) for year ended December 31, 2018 in this situation?