On January 1, 2014, Fine Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty loom from Sheffield Corporation. The following information concerns the lease agreement.

1. The agreement requires equal rental payments of $73,580 beginning on January 1, 2014.

2. The loom's fair value on January 1, 2014, is $450,000.

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

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

5. Fine's incremental borrowing rate is 12% per year. The lessor's implicit rate is not known by Fine Corp.

6. The yearly rental payment includes $2,470.29 of executory costs related to insurance on the loom.

Instructions

(a) Prepare an amortization schedule for the term of the lease to be used by Fine. Use a computer spreadsheet.

(b) Prepare the journal entries on Fine Corp.'s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2014 and 2015 as well as any adjusting journal entries at its fiscal year ends of December 31, 2014, and 2015.

(c) Prepare Fine Corp.'s required note disclosure on the lease for the fiscal year ending December 31, 2015.