Lessee Ltd

Group 4

Case 11-6

Lessee Ltd.

Lessee Ltd. (a British company that applies IFRSs) and Lessor Inc. had a lease agreement starting on January 1, 2007 which Lessee Ltd. rents equipment from Lessor Inc. for three years. The remaining useful life of the equipment is four years. The fair value of the equipment is 265,000. At the end of the lease term, Lessee Ltd. has guaranteed 20,000 as the residual value. The agreement contains no purchase or renewal options, which means at the end of the lease term, Lessee Ltd. needs to return this equipment to Lessor Inc. in original condition. According to the agreement, Lessee Ltd. needs to make lease payments of 100,000 to Lessor Inc. each year. Also, Lessee Ltd. is responsible for other expenses like insurance, tax and maintenance that cost...