On January 1, 2014, Quong Corporation (the lessee) entered into a four-year, non-cancellable equipment lease contract with

Question:

On January 1, 2014, Quong Corporation (the lessee) entered into a four-year, non-cancellable equipment lease contract with Zareiga Inc. (the lessor). The present value of the minimum lease payments required was $116,025. Also at lease inception, it was estimated that the equipment's economic life was eight years, and that its fair value was $150,000. The lease does not transfer title or contain a bargain purchase option.

(a) Assume that Quong follows ASPE. How should Quong classify this lease?

(b) Assume that Quong follows IFRS and uses the classification approach to accounting for leases. How should Quong classify this lease?

(c) Assume that Quong follows IFRS and uses the contract- based approach to accounting for leases. How should Quong account for this lease at lease inception?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...