Accounting Problem Background Information On January 1, 2020,CullumberCorp , which uses IFRS, signs a10 year, non cancellable lease agreement to lease a specialty lathe from Liu Inc The following information concerns the lease agreement 1 The agreement requires equal rental payments of $76,676beginning on January 1, 2020 2 The lathe's fair value on January 1, 2020, is $520,000 3 The lathe has an estimated economic life of12years, with an unguaranteed residual value of $17,000 CullumberCorp depreciates similar equipment using the straight line method 4 The lease is non renewable At the termination of the lease, the lathe reverts to the lessor 5 Cullumber's incremental borrowing rate is9 per year The lessor's implicit rate is not known byCullumberCorp 6 The yearly rental payment includes $2,339 81of executory costs related to insurance on the lathe Assume this is a manufacturer dealer lease Instructions Assume thatCullumber's fiscal year end is May 31 Prepare the journal entries onCullumberCorp 's books to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the calendar years 2020 and 2021 Cullumberdoes not Prepare reversing entries (Credit account titles are automatically indented when the amount is entered Do not indent manually If no entry is required, select No Entry for the account titles and enter 0 for the amounts Round answers to 2 decimal places, e g 52 75 ) Use Template 1 png A list of Accounts is Provided Below List of Accounts Accounts Payable Accounts Receivable Accumulated Depreciation Leased Buildings Accumulated Depreciation Buildings Accumulated Depreciation Leased Equipment Accumulated Depreciation Rental Equipment Accumulated Depreciation Right of Use Asset Accumulated Depreciation Software under Lease Accumulated Depreciation Vehicles Accumulated Depreciation Vehicles under Lease Amortization Expense Buildings Buildings under Lease Cash Cost of Goods Sold Deferred Profit on Sale Leaseback Depreciation Expense Equipment Equipment Acquired for Lessee Equipment under Lease Insurance Expense Insurance Payable Insurance Revenue Interest Expense Interest Income Interest Payable Interest Receivable Inventory Land Rental Expense Land under Lease Lease Liability Lease Receivable Legal Expense Loss on Lease Low Value Lease Expense No Entry Obligations under Lease Operating Expenses Prepaid Expenses Prepaid Insurance Prepaid Rent Property Tax Expense Rent Expense Rental Equipment Rent Payable Rent Receivable Rent Revenue Repairs and Maintenance Expense Right of Use Asset Sales Revenue Selling Expenses Short Term Lease Expense Software under Lease Unearned Interest Income Unearned Rent Revenue Vehicles Vehicles under Lease Template 1 png Date Account Titles and Explanation Debit Credit 1 1 20 ( To record lease payment ) 5 31 20 To record depreciation expense 5 31 20 (To record interest 12 31 20 (To record expired insurance) 1 1 21 (To record lease payment ) 5 31 21 To record depreciation expense 5 31 21 (To record interest 12 31 21 To record expired insurance)

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Accounting Problem Background Information On January 1, 2020,CullumberCorp., which uses IFRS, signs a10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The

Accounting Problem

Background Information

On January 1, 2020,CullumberCorp., which uses IFRS, signs a10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.

1.The agreement requires equal rental payments of $76,676beginning on January 1, 2020.

2.The lathe's fair value on January 1, 2020, is $520,000.

3.The lathe has an estimated economic life of12years, with an unguaranteed residual value of $17,000.CullumberCorp. depreciates similar equipment using the straight-line method.

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

5.Cullumber's incremental borrowing rate is9% per year. The lessor's implicit rate is not known byCullumberCorp.

6.The yearly rental payment includes $2,339.81of executory costs related to insurance on the lathe.

Assume this is a manufacturer/dealer lease.

Instructions

Assume thatCullumber's fiscal year-end is May 31. Prepare the journal entries onCullumberCorp.'s books to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the calendar years 2020 and 2021.Cullumberdoes not Prepare reversing entries.(Credit account titles are automatically indented when the amount is entered.Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 2 decimal places, e.g. 52.75.) Use Template 1.png. A list of Accounts is Provided Below.

List of Accounts

Accounts Payable
Accounts Receivable
Accumulated Depreciation - Leased Buildings
Accumulated Depreciation - Buildings
Accumulated Depreciation - Leased Equipment
Accumulated Depreciation - Rental Equipment
Accumulated Depreciation - Right-of-Use Asset
Accumulated Depreciation - Software under Lease
Accumulated Depreciation - Vehicles
Accumulated Depreciation - Vehicles under Lease
Amortization Expense
Buildings
Buildings under Lease
Cash
Cost of Goods Sold
Deferred Profit on Sale-Leaseback
Depreciation Expense
Equipment
Equipment Acquired for Lessee
Equipment under Lease
Insurance Expense
Insurance Payable
Insurance Revenue
Interest Expense
Interest Income
Interest Payable
Interest Receivable
Inventory
Land Rental Expense
Land under Lease
Lease Liability
Lease Receivable
Legal Expense
Loss on Lease
Low Value Lease Expense
No Entry
Obligations under Lease
Operating Expenses
Prepaid Expenses
Prepaid Insurance
Prepaid Rent
Property Tax Expense
Rent Expense
Rental Equipment
Rent Payable
Rent Receivable
Rent Revenue
Repairs and Maintenance Expense
Right-of-Use Asset
Sales Revenue
Selling Expenses
Short-Term Lease Expense
Software under Lease
Unearned Interest Income
Unearned Rent Revenue
Vehicles
Vehicles under Lease

Template 1.png

Date Account Titles and Explanation Debit Credit 1/1/20 ( To record lease payment.) 5/31/20 [ To record depreciation expense.] 5/31/20 (To record interest.] 12/31/20 (To record expired insurance) 1/1/21 (To record lease payment.) 5/31/21 [ To record depreciation expense.] 5/31/21 (To record interest.] 12/31/21 [To record expired insurance)