Exercise 20-3 The following facts are for a non-cancellable lease agreement between Pharoah Corporation and Russell Corporation, a lessee: Inception date July 1, 2020 Annual lease payment due at the beginning of each year, starting July 1, 2020 $ 21,276.46 Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell $ 3,900.00 Lease term 5 years Economic life of leased equipment 10 years Lessor's cost $ 53,600.00 Fair value of asset at July 1, 2020 $ 89,600.00 Lessor's implicit rate 11% Lessee's incremental borrowing rate 11% The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor. The lessee assumes responsibility for all executory costs. Both Russell and Pharoah use IFRS 16. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. Calculate the amount of the right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75.) Amount Prepare a lease amortization schedule for the lease obligation using a computer spreadsheet for Russell Corporation for the five-year lease term. (Round answers to 2 decimal places, e.g. 52.75.) Russell Corporation (Lessee) Lease Amortization Schedule Annual Lease Interest (11%) Reduction of Balance Date Payment on Unpaid Lease of Lease Plus BPO Obligation Obligation Obligation 7/1/20 7/1/20 7/1/21 $ 7/1/22 7/1/23 7/1/24 6/30/25 $ Prepare the journal entries on the lessee's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Russell's annual accounting period ends on December 31, and Russell 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. 52.75.) Date Account Titles and Explanation Debit Credit 7/1/20 (To record inception and payment of lease.) 12/31/20 (To record interest.) 12/31/20 (To record depreciation expense.) 7/1/2021 (To record lease payment.) 12/31/2021 (To record interest.) 12/31/2021 (To record depreciation expense.)