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On July $1^{st},201,$ the Youngsun Kim Corporation leased equipment to the Irish Lontoc

Corporation. Both the Youngsun Kim and Irish Lontoc Corporation uses ASPE. The following

information pertains to this lease transaction.

The term of the lease is for six years, with no renewal option. The equipment reverts back

to the lessor at the termination of the lease, at which time it is expected to have a residual

value $($not guaranteed$)$ of $$36,000.$

The Corporation amortizes all its equipment on a straight line basis.

The equipment has an economic life of seven years.

Collectibility of the lease payments is reasonably predictable and there are no important

uncertainties about any unreimbursable costs that have not yet been incurred by the lessor.

Equipment rental payments are due on June ${30}^{th},$ of each year, except for the first down

payment which is due on July $1^{st},20x1.$

The Corporation sets the annual rental payment to ensure a $9\mathrm{.}0\%$ rate of return. Irish

Lontoc Corporation's incremental borrowing rate is $10\mathrm{.}0\%$ and the lessor's implicit rate is

unknown to the lessee.

The equipment's fair market value as at July $1^{st},201$ is $$864,000$ and its cost to the

Youngsun Kim is $$650,000.$

Both corporations use reversing entries.

The year end for Irish Lontoc Corporation is December ${31}^{st}.$

The year end for Youngsun Kim Corporation is June ${30}^{th}$

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