Prepare the journal entries on Carla Vista Corps books

Reference no: EM132675695

Question - On January 1, 2020, crane corpe Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.

1. The agreement requires equal rental payments of $76,935 beginning on January 1, 2020.

2. The lathe's fair value on January 1, 2020, is $500,000.

3. The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $17,000. Carla Vista Corp. depreciates similar equipment using the straight-line method.

4. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor.

5. Carla Vista's incremental borrowing rate is 10% per year. The lessor's implicit rate is not known by Carla Vista Corp.

6. The yearly rental payment includes $2,959.82 of executory costs related to insurance on the lathe.

Assume this is a manufacturer/dealer lease.

Required -

Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement.

Prepare an amortization schedule for the term of the lease to be used by Carla Vista. Use Excel. (R

Prepare the journal entries on Carla Vista Corp.'s books to record the payments and expenses related to this lease for the years 2020 and 2021 as well as any adjusting journal entries at its fiscal year ends of December 31, 2020 and 2021. Carla Vista does not use reversing entries.

Reference no: EM132675695

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