Exercise 20-11 Oriole Leasing Corporation, which uses IFRS 16, signs a lease agreement on January 1, 2017 to lease electronic equipment to Wai Corporation, which also uses IFRS 16. The term of the non-cancellable lease is two years and payments are required at the end of each year. The following information relates to this agreement. 1. Wai Corporation has the option to purchase the equipment for $12,800 upon the termination of the lease and this option is reasonably certain to be exercised. 2. The equipment has a cost and fair value of $180,000 to Oriole Leasing Corporation. The useful economic life is two years, with a residual value of $12,800. 3. Wai Corporation is required to pay $5,400 each year to the lessor for insurance costs. 4. Oriole Leasing Corporation wants to earn a return of 10% on its investment. 5. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs that have not yet been incurred by the lessor. Click here to view the factor table Using time value of money tables, a financial calculator, or Excel functions, calculate the lease payment that Oriole Leasing would require from Wai Corporation. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places, e.g. 52.75) Lease payments Prepare a lease amortization table for Oriole Leasing for the term of the lease. (Round answers to 2 decimal places, e.g. 52.75.) ORIOLE LEASING CORPORATION (Lessor) Lease Amortization Schedule Annual Payment Excluding Interest on Net Net Investment Net Date Executory Costs Investment Recovery Investment 12/31/17 s 12/31/18 Prepare the journal entries on Oriole Leasing's books to reflect the payments received under the lease and to recognize income for the years 2017 and 2018. (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 factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75.) Date Account Titles and Explanation Debit Credit (To record the receipt of lease payment & insurance cost) (To record accrued interest) To record the receipt of lease payment & insurance cost) (To record accrued interest) Assuming that Wai Corporation exercises its option to purchase the equipment on December 31, 2018, prepare the journal entry to reflect the sale on Oriole Leasing's books. (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 answers to 2 decimal places, e.g. 52.75.) Date Account Titles and Explanation Debit Credit 12/31/18 What amount would Wai Corporation capitalize and recognize as a lease liability and corresponding right-to-use asset on signing the lease? (Round answer to 2 decimal places e.g. 52.75) Amount
