60.1K

Verified Solution

Link Copied!

Oriole Leasing Corporation, which uses IFRS 16, signs a lease agreement on January 1, 2020, to lease electronic equipment to Wai Corporation, which also uses IFRS 16. The term of the non-cancellable lease is two years and payments are required at the end of each year. The following information relates to this agreement.

1.		Wai Corporation has the option to purchase the equipment for $12,400 upon the termination of the lease and this option is reasonably certain to be exercised.
2.		The equipment has a cost and fair value of $170,000 to Oriole Leasing Corporation. The useful economic life is two years, with a residual value of $12,400.
3.		Wai Corporation is required to pay $5,700 each year to the lessor for insurance costs.
4.		Oriole Leasing Corporation wants to earn a return of 9% on its investment.
5.		Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by the lessor.

Using time value of money tables, a financial calculator, or Excel functions, calculate the lease payment that Oriole Leasing would require from Wai Corporation. (Hint: You may find the ROUND formula helpful for rounding in Excel.)

Give journal entries as well.

Answer & Explanation Solved by verified expert

See Answer