Pain Limited (“Pain”) manufactures dental chairs for sale and for lease. On October 1, 2019, they enter into a 5 year, non-cancellable agreement to lease 4 chairs to Red Deer Dental. (“RDD”). Pain has a December 31st fiscal year-end and RDD has a September 30th fiscal year-end. Both companies depreciate their equipment on a straight-line basis and the chairs would have a nil (zero) residual value at the end of their economic life. Terms of the lease agreement are as follows: · Pain’s carrying value of the tables (4 * $6,500) $ 26,000 · Annual payments (4 chairs * $1,650 per chair) due each October 1 (commencing 2019) $ 6,600 · Bargain purchase option after 5 years (4 chairs * $250 per chair) $ 1,000 · Economic life of the chairs 6 years · Interest rate implicit in the lease 10% There are no unreimbursable costs likely to be incurred by the lessor and the credit risk associated with the lease is normal. Pain follows IFRS, RDD follows ASPE.

Answer rating: 100% (QA)

Answer Solution PV Present value of Minimum Lease payments 1000000943410000008 46607... View the full answer