Mulholland Corp., a lessee, entered into a non-cancellable lease agreement with Galt Manufacturing Ltd., a lessor, to lease special-purpose equipment for a period of seven years. Mulholland follows IFRS 16 and Galt follows ASPE. The following information relates to the agreement:

The leased equipment reverts to Galt Manufacturing at the end of the lease, although Mulholland has an option to purchase it at its expected fair value at that time.
Instructions
(a) Using time value of money tables, a financial calculator, or Excel functions, calculate the lease payment determined by the lessor to provide a 12% return.
(b) Prepare a lease amortization schedule for Galt Manufacturing, the lessor, covering the entire term of the lease.
(c) Assuming that Galt Manufacturing has a December 31 year end, and that reversing entries are not made, prepare all entries made by the company up to and including May 2, 2019.
(d) Identify the balances and classification of amounts that Galt Manufacturing will report on its December 31, 2017 balance sheet, and the amounts on its 2018 income statement and statement of cash flows related to this lease.
(e) Determine the treatment of the lease by Mulholland. Using Excel, calculate the present value of the future cash flows under the lease.
(f) Prepare an amortization schedule for the first three payments on the lease. Round all amounts to the nearest dollar.
(g) Assuming that Mulholland has a December 31 year end, and that reversing entries are not made, prepare all entries made by the company up to and including May 2, 2019. Assume payments of repairs and maintenance expenses of $10,000, $14,400, and $14,950 covering fiscal years 2017, 2018, and 2019, respectively.
(h) Identify the balances and classification of amounts that Mulholland will report on its December 31, 2017 statement of financial position, and the amounts on its 2017 statement of income and statement of cash flows related to this lease.
(i) On whose statement of financial position should the equipment appear? On whose statement of financial position does the equipment currently get reported?
(j) Repeat parts (e), (g), (h), and (i) under the assumption that Mulholland follows ASPE.

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Lease inception Annual lease payment due at the beginning of each lease year Residual value of equipment at end of lease term, guaranteed by an independent third party Economic life of equipment Usual selling price of equipment Manufacturing cost of equipment on lessor's books Lessor's implicit interest rate, known to lessee Lessee's incremental borrowing rate Repairs and maintenance per year to be paid by lessee, estimated May 2, 2017 $100,000 10 years $415,000 $327,500 12% 12% $14,500