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1. The following facts are for a non-cancellable lease agreement between Oriole Corporation and Russell Corporation, a lessee: Inception date July 1, 2020 Annual lease

1. The following facts are for a non-cancellable lease agreement between Oriole Corporation and Russell Corporation, a lessee:

Inception date July 1, 2020

Annual lease payment due at the beginning of each year, starting July 1, 2020

$ 20,954.73

Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell

$ 3,900.00

Lease term

5 years

Economic life of leased equipment

10 years

Lessors cost

$ 43,800.00

Fair value of asset at July 1, 2020

$ 89,800.00

Lessors implicit rate

10%

Lessees incremental borrowing rate

10%

The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor. The lessee assumes responsibility for all executory costs. Both Russell and Oriole use IFRS 16.

Calculate the amount of the right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75.)

Amount $enter a dollar amount

Prepare a lease amortization schedule for the lease obligation using a computer spreadsheet for Russell Corporation for the five-year lease term. (Round answers to 2 decimal places, e.g. 52.75.)

Russell Corporation (Lessee) Lease Amortization Schedule
Date Annual Lease Payment Plus BPO Interest (10%) on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligation

7/1/20

$enter a dollar amount

7/1/20

$enter a dollar amount $enter a dollar amount enter a dollar amount

7/1/21

enter a dollar amount $enter a dollar amount enter a dollar amount enter a dollar amount

7/1/22

enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount

7/1/23

enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount

7/1/24

enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount

6/30/25

enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount
$enter a total amount $enter a total amount $enter a total amount

Prepare the journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Russells annual accounting period ends on December 31, and Russell does not use reversing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 52.75.)

Date

Account Titles and Explanation

Debit

Credit

7/1/20

enter an account title to record inception and payment of lease

enter a debit amount

enter a credit amount

enter an account title to record inception and payment of lease

enter a debit amount

enter a credit amount

enter an account title to record inception and payment of lease

enter a debit amount

enter a credit amount

(To record inception and payment of lease.)

12/31/20

enter an account title to record interest

enter a debit amount

enter a credit amount

enter an account title to record interest

enter a debit amount

enter a credit amount

(To record interest.)

12/31/20

enter an account title to record depreciation expense

enter a debit amount

enter a credit amount

enter an account title to record depreciation expense

enter a debit amount

enter a credit amount

(To record depreciation expense.)

7/1/2021

enter an account title to record lease payment

enter a debit amount

enter a credit amount

enter an account title to record lease payment

enter a debit amount

enter a credit amount

enter an account title to record lease payment

enter a debit amount

enter a credit amount

(To record lease payment.)

12/31/2021

enter an account title to record interest

enter a debit amount

enter a credit amount

enter an account title to record interest

enter a debit amount

enter a credit amount

(To record interest.)

12/31/2021

enter an account title to record depreciation expense

enter a debit amount

enter a credit amount

enter an account title to record depreciation expense

enter a debit amount

enter a credit amount

(To record depreciation expense.)

2. Crane Ltd., a public company following IFRS 16, recently signed a lease for equipment from Costner Ltd. The lease term is 6 years and requires equal rental payments of $18,893 at the beginning of each year. The equipment has a fair value at the leases inception of $103,000, an estimated useful life of 6 years, and no residual value. Crane pays all executory costs directly to third parties. The appropriate interest rate is 4%. Using tables, a financial calculator, or Excel functions, calculate the amount of the right-of-use asset and lease liability. Prepare the initial entry to reflect the signing of the lease agreement and the first payment under the lease. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation

Debit

Credit

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

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