Reference no: EM133085004

Question - On January 1, 2021, Wildhorse Ltd., which uses IFRS 16, entered into an eight-year lease agreement for a conveyor machine. Annual lease payments are $24,700 at the beginning of each lease year, which ends December 31, and Wildhorse made the first payment on January 1, 2021. At the end of the lease, the machine will revert to the lessor. However, conveyor machines are expected to last for only eight years and have no residual value. At the time of the lease agreement, conveyor machines could be purchased for $146,000 cash. Equivalent financing for the machine could have been obtained from Wildhorse's bank at 10%. Wildhorse's fiscal year coincides with the calendar year. Wildhorse uses straight-line depreciation for its conveyor machines.

Calculate the PV of the minimum lease payments using (1) a financial calculator or (2) Excel functions.

Prepare an amortization schedule for the term of the lease to be used by Wildhorse Ltd.

Prepare the journal entries on Wildhorse Ltd.'s books to (1) reflect the signing of the lease agreement, (2) record the payments and expenses related to this lease for the years 2021 and 2022, and (3) make any adjusting journal entries at its fiscal year ends of December 31, 2021 and 2022. Wildhorse does not use reversing entries.

Prepare a partial comparative statement of financial position at December 31, 2022, and 2021, for all of the accounts related to this lease for Wildhorse Ltd. Be specific about the classifications that should be used.