Solution-Prepare a lease amortization schedule

Prepare a lease amortization schedule

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Reference no: EM133207381

The following facts are for a non-cancellable lease agreement between Wildhorse 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	$20,993.07
Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell	$3,500.00
Lease term	5 years
Economic life of leased equipment	10 years
Lessor's cost	$46,400.00
Fair value of asset at July 1, 2020	$88,200.00
Lessor's implicit rate	11%
Lessee's incremental borrowing rate	11%

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 Wildhorse use IFRS 16.

Required:

Prepare a lease amortization schedule for the lease obligation using a computer spreadsheet for Russell Corporation for the five-year lease term. (Present value of an annuity of 1 for 5 years, 9% discounted rate is 4.23972 and single sum of present value is 0.64993)
Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Russell's annual accounting period ends on December 31, and Russell does not use reversing entries.

Reference no: EM133207381

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Prepare a lease amortization schedule

Reference no: EM133207381

Reference no: EM133207381

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