Brief Exercise 20-6

Carla Vista Ltd., a public company following IFRS 16, recently signed a lease for equipment from Costner Ltd. The lease term is 3 years and requires equal rental payments of $41,336 at the beginning of each year. The equipment has a fair value at the leases inception of $119,300, an estimated useful life of 3 years, and no residual value. Carla Vista 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.