Exercise 20-2 On January 1, 2017, Ivanhoe Corp., which uses IFRS 16, 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. 4. 5. 6. The agreement requires equal rental payments of $90,780 beginning on January 1, 2017. The lathe's fair value on January 1, 2017 is $600,000. The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $17,000. Ivanhoe 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 Ivanhoe's incremental borrowing rate is 10% per year. The lessor's implicit rate is not known by Ivanhoe Corp. The yearly rental payment includes $2,009.78 of executory costs related to insurance on the lathe. Click here to view the factor table. Assume that Ivanhoe's fiscal year end is May 31. Prepare the journal entries on Ivanhoe Corp.'s books to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the calendar years 2017 and 2018. Ivanhoe does 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 o for the amounts. Round answers to 2 decimal places, e.g. 52.75.) Date Account Titles and Explanation Debit Credit 1/1/17 (To record payment of lease and insurance) 5/31/17 (To record depreciation) 5/31/17 (To record accrued interest) 12/31/17 (To record insurance) 1/1/18 (To record payment of lease and insurance) 5/31/18 (To record depreciation) 5/31/18 (To record accrued interest) 2/31/18 (To record insurance)