Using the information provided in E18-15, assume now that Stewart Standard and Kane Kite are IFRS reporters.

Required

a. Determine the lessor’s classification of the lease.

b. Measure the right-of-use asset and the lease liability at January 1, 2022 and prepare the lessee’s amortization table.

c. Prepare the journal entries for Stewart Standard for 2022.

Data from Exercises 15

On January 1, 2022, Kane Kite Company leased a nonspecialized fabric-cutting machine from Stewart Standard, Inc. Under the terms of the lease, Kane Kite must pay $200,000 on January 1 of each year, starting in 2022, over a 9-year term. The lease terms do not contain a transfer of ownership, and there is no purchase option. There is also no residual value specified in the contract. The cutting machine has a useful life of 9 years and Kane Kite depreciates similar equipment that it owns using the straight-line method. Kane Kite’s incremental borrowing rate is 9%, and the implicit rate of 8% in the lease is known to Kane Kite. The machine cost Stewart Standard $1,300,000 to manufacture, and it has a selling price of $1,349,328. Stewart indicates that collection of the annual lease payments is reasonably certain. Kane is required to pay $5,600 at the end of each year for maintenance to independent third parties, which it records as general and administrative expenses. Neither party to the lease incurs initial indirect costs.