Castle Leasing Corporation, which uses IFRS 16, signs a lease agreement on January 1, 2017 to lease electronic equipment to Wai Corporation, which also uses IFRS 16. The term of the non-cancellable lease is two years and payments are required at the end of each year. The following information relates to this agreement. 1. Wai Corporation has the option to purchase the equipment for $13,000 upon the termination of the lease and this option is reasonably certain to be exercised. 2. The equipment has a cost and fair value of $135,000 to Castle Leasing Corporation. The useful economic life is two years, with a residual value of $13,000. 3. Wai Corporation is required to pay $5,000 each year to the lessor for insurance costs. 4. Castle Leasing Corporation wants to earn a return of 10% on its investment. 5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by the lessor. Instructions (a) Using time value of money tables, a financial calculator, or Excel functions, calculate the lease payment that Castle Leasing would require from Wai Corporation. Round all amounts to the nearest dollar. (b) What classification will Wai Corporation give to the lease? What classification will be given to the lease by Castle Leasing Corporation? (c) What classification would be adopted by Wai Corporation and Castle Leasing Corporation had they both been using ASPE? (d) Prepare a l
