Your employer, Sheffield Inc., is a large Canadian public company that uses IFRS. You have collected the following information about a lease for a fleet of trucks used by Sheffield to transport completed products to warehouses across the country. The trucks have an economic life of eight years. The lease term is from July $1,2023,$ to June $30,2030,$ and the company intends to lease the equipment for this period of time, so the lease term is seven years. The lease payment per year is $$535,000,$ payable in advance, with no other payments required, and no renewal option or purchase option available. The expected value of the fleet of trucks at June $30,2030,$ is $$443,500$; this value is guaranteed by Sheffield. The leased trucks must be returned to the lessor at the end of the lease.

Sheffield's management is confident that, with an aggressive maintenance program, Sheffield has every reason to believe that the asset's residual value will be more than the guaranteed amount at the end of the lease term. Sheffield's incremental borrowing rate is $9\%,$ and the rate implicit in the lease is not known. At the time the lease was signed, the fair value of the leased trucks was $$2,934,967.$

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