Current Attempt in Progress On January 1, 2020, Cullumber Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement. 1. 2. 3. The agreement requires equal rental payments of $69,478 beginning on January 1, 2020, The lathe's fair value on January 1, 2020, is $470,000, The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $15,000. Cullumber Corp. depreciates similar equipment using the straight-line method. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor, Cullumber's incremental borrowing rate is 9% per year. The lessor's implicit rate is not known by Cullumber Corp. The yearly rental payment includes $2,289.52 of executory costs related to insurance on the lathe. 4. 5. 6. Assume this is a manufacturer/dealer lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement. (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 O for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 5,275.25.) Date Account Titles and Explanation Debit Credit 1/1/20 e Textbook and Media List of Accounts Prepare an amortization schedule for the term of the lease to be used by Cullumber. Use Excel. (Round answers to 2 decimal places, e.g. 5,275.25.). CULLUMBER CORP. Lease Amortization Schedule (Lessee) Annual Payment Excluding Executory Costs Interest on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligatior Date $ I Jan. 1.2020 $ Jan. 1.2021 Jan 1, 2022 Jan. 1.2023 Jan. 1.2024 Jan. 1.2021 Jan 1, 2022 Jan. 1, 2023 Jan 1, 2024 Jan 1, 2025 Jan 1, 2026 Jan. 1. 2027 Jan 1, 2028 Jan. 1,2029 $ Prepare the journal entries on Cullumber Corp's books to record the payments and expenses related to this lease for the years 2020 and 2021 as well as any adjusting journal entries at its fiscal year ends of December 31, 2020 and 2021. Cullumber 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. 5,275.25.) Date Account Titles and Explanation Debit Credit 12/31/20 (To record depreciation expense.) 12/31/20 (To record interest.) 1/1/21 (To record interest.) 1/1/21 (To record lease payment.) 12/31/21 (To record depreciation expense.) 12/31/21 (To record interest.)
