Reference no: EM132699847
Neovasc Corp., a lessee, entered into a non-cancellable lease agreement with Accord Ltd., a lessor, to lease special-purpose equipment for a period of seven years. Both companies are listed firms that follows IFRS, and have a December 31 fiscal year end. The following information relates to the agreement:
Lease inception May 2, 2020
Residual value of equipment at end of lease term,
guaranteed by Neovasc $100,000
Economic life of equipment 10 years
Usual selling price of equipment $415,000
Manufacturing cost of equipment on lessor's books $327,500
Lessor's implicit interest rate, known to lessee 12%
Lessee's incremental borrowing rate 15%
Annual repairs and maintenance to be paid separately by lessee to related 3rd parties at the time of lease payment $10,000
The leased equipment can revert to Accord at the end of the lease; Neovasc has an option to purchase it at its expected fair value at that time, and Neovasc is certain to exercise the purchase option.
Present value of $1, 12%, n=7 periods is 0.45235;
Present value of $1, 15%, n=7 periods is 0.37594;
Present value of annuity (due) of $1,12%, n=7 periods is 5.1114.
Present value of annuity (due) of $1,15%, n=7 periods is 4.78448.
Present value of ordinary annuity of $1,12%, n=7 periods is 4.56376.
Present value of ordinary annuity of $1,15%, n=7 periods is 4.16042.
Requirements:
Question 1. Show the calculation how the lessor determines the annual lease payment; and also show how the lessee calculates the present value of its lease payments under the lease, with the aim to measure its lease liabilities and assets.
Question 2. Briefly discuss how the lessor will account for the lease (Justify all the relevant factors and calculation.
Question 3. Prepare all related entries for the lease made by the lessor up to and including December 31, 2020. Do the same for the lessee.
Question 4. Present the balances/classifications of the lease-related items that the lessee needs to report on its 2020 statement of financial position (SFP). Show your calculations for the lease-related liability items.
|
Compute the final demand for each type of product
: National exporters (NE) Ltd manufactures Agricultural, Compute the final demand for each type of product. Compute the total worth of primary inputs
|
|
Write a balanced chemical equation
: Combustion of hydrocarbons such as undecane (C11H24) produces carbon dioxide, a "greenhouse gas." Greenhouse gases in the Earth's atmosphere
|
|
Find the company predetermined overhead rate for year
: Find the company's predetermined overhead rate for the year, calculate the total overhead applied, and determine the amount of under- or overapplied
|
|
Determine the valence of element in the formula
: 1. Use the following experimental formulas to determine the valence of each element inthe formula:
|
|
How the lessee calculates the present value of lease payment
: How the lessee calculates the present value of its lease payments under the lease, with the aim to measure its lease liabilities and assets.
|
|
Calculate the pressure of the same sample
: The van der Waals equation of state was designed (by Dutch physicist Johannes van der Waals) to predict the relationship between pressure p, volume V
|
|
Create a formula for the monthly cost of SUVs for Kleenaire
: The company incurs $200,000,000 of variable manufacturing overhead resources to produce 50,000 SUVs per month. Create a formula for the monthly cost of SUVs
|
|
Calculate the pressure of dinitrogen monoxide gas
: Calculate the pressure of dinitrogen monoxide gas in the reaction vessel after the reaction. You may ignore the volume of the liquid reactants.
|
|
What effect did the adjustments have on financial statement
: Wild Adventure, What effect did the adjustments have on the financial statements? What effect did the adjustments have on the current ratio?
|