On January 1, 2017, Fine Corp., which follows IAS 17, 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, 2017.

2. The loom's fair value on January 1, 2017 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) Using a financial calculator or Excel functions, calculate the present value of the minimum lease payments and prepare the initial entry to reflect the signing of the lease agreement.

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

(c) Prepare the journal entries on Fine Corp.'s books to record the payments and expenses related to this lease for the years 2017 and 2018 as well as any adjusting journal entries at its fiscal year ends of December 31, 2017 and 2018.