On January $1,2023,$ Brady Inc. enters into a $5-$year non$-$cancellable lease with

Brees Ltd$.$ for equipment that has an estimated useful life of $5$ years and a fair

value of $$1,900,000.$ Brady's incremental borrowing rate is $8\%$ and Brees' implicit

rate is $6\%.$ Brady uses the straight$-$line depreciation method to depreciate assets.

Brady will make annual lease payments on January $1$ of each year $($with the first

payment due at the beginning of the lease$)$ based on the fair value of the

equipment. The lease agreement includes a guarantee that Brady will take over

ownership of the equipment from Brees for a final payment of $$100,000.$ In

addition to the equipment, Brees convinced Brady to also lease some small office

equipment. For a $$300$ a month lease payment, for a term of $1$ year, Brady gets

the equipment it needs to run a small office with $3$ staff. Both companies adhere

to IFRS.

Instructions

a$)$ Calculate the lease payment Brees Ltd$.$ will charge Brady Inc. assuming that

there is no mark up on the fair value of the equipment. Round to the nearest

dollar.

b$)$ Calculate the present value of the minimum lease payments. Round to the

nearest dollar.

c$)$ Present the journal entries that Brady Inc. would record during the first year

of the equipment lease. Round to the nearest dollar.

d$)$ Prepare the journal entries that Brady Inc. would record in the first two

months of the office equipment lease. Round to the nearest dollar.

e$)$ CRITICAL THINKING: Are these two lease agreements accounted for

differently. If so$,$ why is there a difference?