Workout Machines mc, an Alberta based dealer of the machines On November 1, 2020, Workout agreed to lease machinery to incl Counder four ac non cancellable, non-renewable lease agrement. Both corporations follow Accounting Standards for Prate Enterprises and have October 31 yarends 3 The following information pertains to the lease agreement . Epical assumes direct responsibility for all executory costs, which amount to $500 per year and are to be paid each November 1 beginning November 1, 2020, Collectability of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by Workout Machines Inc. Annual payments of $2.114 are made each November 1st. The lessee made the first lease payment on November 1, 2020 At the end of the four-year agreement, there is no title transfer or bargain purchase option available to the lessee. The fair value of the leased machinery on November 1, 2020 is $8,500. The machinery cost to Workout Machines Inc. is $6,100. Elliptical's incremental borrowing rate is 7%. Workout wants to earn an 8% rate of return on any financing transaction. The implicit rate is not known by the lessee. The leased machinery has an estimated economic life of five-years, and has an expected residual value of $1,275 at the end of year four, which is unguaranteed by the lessee. 16 Step 1: Lease classification criteria both for the lessee and Lessor and for IFRS and ASPE has been provided below. Select whether the criteria test is needed for Workout Machines using the drop-down bon provided (Yes/No), HINT Identify which test is needed given the standard followed by the LESSOR 17 TH Step 2: For the criteria tests with bluo cells ONLY select from the drop-down box an appropriate response for Workout Machiner. Read 19 through all possible responses 20 Step 1: Lease criteria test Required Step 2: Select Appropriate response 21 test? 2 Low-valued asset 3 Short-term lease Transfer of ownership Economic life test Substantial recovery test Specialized asset Normal credit risk All costs known Step 3: Assume Workout Machines Inc. concludes the lease to be a capital tease Select using the drop-down box the specific type of lease. 12 Explain why you made your selection Specific type of lease: Explanation why Workout Machines mc, an Alberta based dealer of the machines On November 1, 2020, Workout agreed to lease machinery to incl Counder four ac non cancellable, non-renewable lease agrement. Both corporations follow Accounting Standards for Prate Enterprises and have October 31 yarends 3 The following information pertains to the lease agreement . Epical assumes direct responsibility for all executory costs, which amount to $500 per year and are to be paid each November 1 beginning November 1, 2020, Collectability of the lease payments is reasonably predictable. There are no important uncertainties surrounding the amount of costs yet to be incurred by Workout Machines Inc. Annual payments of $2.114 are made each November 1st. The lessee made the first lease payment on November 1, 2020 At the end of the four-year agreement, there is no title transfer or bargain purchase option available to the lessee. The fair value of the leased machinery on November 1, 2020 is $8,500. The machinery cost to Workout Machines Inc. is $6,100. Elliptical's incremental borrowing rate is 7%. Workout wants to earn an 8% rate of return on any financing transaction. The implicit rate is not known by the lessee. The leased machinery has an estimated economic life of five-years, and has an expected residual value of $1,275 at the end of year four, which is unguaranteed by the lessee. 16 Step 1: Lease classification criteria both for the lessee and Lessor and for IFRS and ASPE has been provided below. Select whether the criteria test is needed for Workout Machines using the drop-down bon provided (Yes/No), HINT Identify which test is needed given the standard followed by the LESSOR 17 TH Step 2: For the criteria tests with bluo cells ONLY select from the drop-down box an appropriate response for Workout Machiner. Read 19 through all possible responses 20 Step 1: Lease criteria test Required Step 2: Select Appropriate response 21 test? 2 Low-valued asset 3 Short-term lease Transfer of ownership Economic life test Substantial recovery test Specialized asset Normal credit risk All costs known Step 3: Assume Workout Machines Inc. concludes the lease to be a capital tease Select using the drop-down box the specific type of lease. 12 Explain why you made your selection Specific type of lease: Explanation why
