Brief Exercise 20-6

Oriole 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 $44,046 at the beginning of each year. The equipment has a fair value at the leases inception of $124,800, an estimated useful life of 3 years, and no residual value. Oriole pays all executory costs directly to third parties. The appropriate interest rate is 6%. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. 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.)

There are THREE (3) lines in the journal entry.