Exercise 20-4

The following facts are for a non-cancellable lease agreement between Cullumber Corporation and Russell Corporation, a lessee:

Inception dateJuly 1, 2020Annual lease payment due at the beginning of each year, starting July 1, 2020$20,239.62Bargain purchase option price at end of lease term reasonably certain to be exercised by Russell$4,600.00Lease term5 yearsEconomic life of leased equipment10 yearsLessor's cost$53,000.00Fair value of asset at July 1, 2020$88,800.00Lessor's implicit rate9%Lessee's incremental borrowing rate9%

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 Cullumber 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 gross investment at the inception of the lease for Cullumber Corporation, the lessor.(Round answers to 2 decimal places, e.g. 52.75.)

Gross investment$Enter your answer in accordance to the question statement

Calculate the amount of net investment at the inception of the lease for Cullumber Corporation, the lessor.(Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75.)

Net investment$Enter your answer in accordance to the question statement

Prepare lease amortization schedule using a computer spreadsheet for Cullumber Corporation for the five-year lease term.(Round answers to 2 decimal places, e.g. 52.75.)

Cullumber Leasing Corporation (Lessor)

Lease Amortization Schedule.

Date Annual Interest Net. Balance

lease. On net Invest- Of net

Payment Investment ment. Invest-

Plus PO Recovery Ment

7/1/20. $-

7/1/20$. $ $ $--

7/1/21$. $. $- $-

7/1/22$. $. $. $

7/1/23$. $. $. $-

7/1/24$. $ $. $-

6/30/24$. $. $. $

$- $- $ $-

Prepare the journal entries to reflect the signing of the lease and to record the receipts and income related to this lease for the years 2020, 2021, and 2022. The lessor's accounting period ends on December 31, and Cullumber Corporation 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 A/cTitles Dr. Cr.

7/1/20 . . -

- . -

. - -

. . -

- . -

. - -

(To record lease and cost of goods sold)

Date A/cTitles Dr. Cr.

. . -

- . -

(To record interest)

Date A/cTitles Dr. Cr.

. . -

- . -

( Collection of lease payment)

Date A/cTitles Dr. Cr.

. . -

- . -

(To record interest)

Date A/cTitles Dr. Cr.

. . -

- . -

(To record interest)

Date A/cTitles Dr. Cr.

. . -

- . -

( Collection of lease payment)

Date A/cTitles Dr. Cr.

. . -

- . -

(To record interest)

Date A/cTitles Dr. Cr.

. . -

- . -

(To record interest)