Assume the same data as in P20-15 and that Provincial Airlines Corp. has an incremental borrowing rate of 8%.

Instructions
Answer the following questions, rounding all numbers to the nearest dollar.

(a) Discuss the nature of this lease in relation to the lessee.
(b) What classification will Provincial Airlines Corp. give to the lease?
(c) What difference, if any, would occur in the classification of the lease if Provincial were using IFRS 16?
(d) Using time value of money tables, a financial calculator, or Excel functions, calculate the amount of the initialobligation under capital leases.
(e) Prepare a 10-year lease amortization schedule for the lease obligation using Excel.
(f) Prepare all of the lessee's journal entries for the first year, assuming that the lease year and Provincial Airlines' fiscalyear are the same.
(g) Prepare the entries in part (f) again, assuming that the residual value of $15,000 was guaranteed by the lessee.
(h) Prepare the entries in part (f) again, assuming a residual value at the end of the lease term of $45,000 and apurchase option of $15,000.
(i) Prepare all necessary journal entries in part (1) again, assuming Provincial Airlines Corp. followed IAS 17.

Data From P20-15:

CHL Corporation manufactures specialty equipment with an estimated economic life of 12 years and leases it to Provincial Airlines Corp. for a period of 10 years. Both CHL and Provincial Airlines follow ASPE. The equipment’s normal selling price is $210,482 and its unguaranteed residual value at the end of the lease term is estimated to be $15,000. Provincial Airlines will pay annual payments of $25,000 at the beginning of each year and all maintenance, insurance, and taxes. CHL incurred costs of $105,000 in manufacturing the equipment and $7,000 in negotiating and closing the lease. CHL has determined that the collectibility of the lease payments is reasonably predictable, that no additional costs will be incurred, and that the implicit interest rate is 8%.