Great Mining Plc. is in need of new machine hence, on January 1, 2018, Great Mining enters into a nine - year non cancel able lease for equipment having an estimated life of 10 years a fair value to lessor, Car-guard Ltd , at the inception of the lease of $8,000,000. Car-Guard Ltd incremental borrowing rate is 8% . Car - Guard Ltd uses the straight- Line Method to depreciate its assets. The contains the following Provisions:-

1. Rental Payment of $532,000, Payable at the beginning of each six months period.
2. An option allowing the Lessor to extend the lease one year beyond the lease term it very certain that the option will be exercised.
3. A guarantee by Great Mining Plc. that the Daly corporation will realize $400,000 from selling the asset at expiration of the lease. However the actual residual value is expected to be $ 240,000.

Required :

(a) What kind of lease is this to Great Mining Plc?

(b) Show how Great Mining will record this lease on January 1, 2018?

(c) Explain why car guard will classify this as a finance Lease

(d) Show how Car guard will record this lease on January 1, 2018?

(e) what journal entries would Great Mining record during the first 2 years of the lease?

Answering according to IFRS 16