Question

The following facts are for a non-cancellable lease agreement between Blossom Corporation and Russell Corporation, a lessee:

Inception date		July 1, 2020
Annual lease payment due at the beginning of each year, starting July 1, 2020		$	20,194.64
Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell		$	3,700.00
Lease term			5 years
Economic life of leased equipment			10 years
Lessor’s cost		$	48,800.00
Fair value of asset at July 1, 2020		$	89,600.00
Lessor’s implicit rate			8%
Lessee’s incremental borrowing rate			8%

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor. The lessee assumes responsibility for all executory costs. Both Russell and Blossom use IFRS 16.

(a) Calculate the amount of the right-of-use asset and lease liability.

Answer 1