MacAskill Mills Limited follows IFRS, has a calendar year end, and adopted the policy of classifying interest paid as financing activities. It engaged in the following transactions in 2020. 

1. The Land account increased by $58,000 over the year: Land that originally cost $60,000 was exchanged along with a cash payment of $3,000 for another parcel of land with a fair value of $91,000. Additional land was acquired later in the year in a cash purchase. 

2. The Equipment account had a balance of $67,500 at the beginning of the year and $62,000 at the end. The related Accumulated Depreciation account decreased over the same period from a balance of $24,000 to $15,200. Fully depreciated equipment that cost $10,000 was sold during the year for $1,000. In addition, equipment that cost $3,000 and had a carrying amount of $700 was discarded, and new equipment was acquired and paid for. 

3. A five-year right-of-use lease for specialized equipment was entered into on July 2, 2020. Under the terms of the lease, the company agreed to make five annual payments (in advance) of $25,000, after which the equipment will revert to the lessor. The present value of these lease payments at the 10% rate that is implicit in the lease was $104,247. The first payment was made as agreed. MacAskill depreciates equipment using the straight-line method with no residual value. 

Instructions 

a. Prove the 10% implicit rate used in the lease of item 3 by using (1) factor Tables A.2 and A.4, (2) a financial calculator, or (3) Excel function PV. Round to the nearest dollar.For each listed item: 

b. Prepare the underlying journal entries that were made by MacAskill Mills during 2020 to record all information related to the changes in each capital asset account and related accounts over the year. Round to the nearest dollar. 

c. Identify the amount(s) of the cash flows that result from the transactions and events recorded in part (b), and determine the classification of each one on the statement of cash flows within investing activities and financing activities. 

d. Prepare the corresponding amounts to those prepared in part (c) for the operating activities section of the statement of cash flows prepared using the indirect method. 

e. What additional disclosure is required effective January 1, 2020, concerning the changes in liabilities arising from financing activities?