Oakridge Leasing Corporation which uses private

enterprise GAAP signs an #1502

Oakridge Leasing Corporation, which uses private enterprise GAAP, signs an agreement on
January 1, 2011, to lease equipment to LeBlanc Limited. The following information relates to the
agreement:1. The term of the non-cancellable lease is five years, with no renewal option. The
equipment has an estimated economic life of six years.2. The asset’s fair value at January 1,
2011, is $80,000.3. The asset will revert to the lessor at the end of the lease term, at which time
the asset is expected to have a residual value of $7,000, which is not guaranteed.4. LeBlanc
Limited assumes direct responsibility for all executory costs, which include the following annual
amounts: $900 to Rocky Mountain Insurance Corporation for insurance and $1,600 to James
County for property taxes.5. The agreement requires equal annual rental payments of
$18,142.95 to the lessor, beginning on January 1, 2011.6. The lessee’s incremental borrowing
rate is 11%. The lessor’s implicit rate is 10% and is known to the lessee.7. LeBlanc Limited
uses the straight-line depreciation method for all equipment.8. LeBlanc uses reversing entries
when appropriate.InstructionsAnswer the following, rounding all numbers to the nearest cent.(a)
Use a computer spreadsheet to prepare an amortization schedule for LeBlanc Limited for the
lease term.(b) Prepare all of LeBlanc’s journal entries for 2011 and 2012 to record the lease
agreement, the lease payments, and all expenses related to this lease. Assume that the
lessee’s annual accounting period ends on December 31. (c) Provide the required note
disclosure for LeBlanc Limited concerning the lease for the fiscal year ending December 31,
2012.(d) Would this lease be considered a capital lease if the company reported under IFRS?
Would the note disclosure required in (c) above need to be modified under IFRS?View Solution:
Oakridge Leasing Corporation which uses private enterprise GAAP signs an

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