Exercise 20-7 On January 1, 2017, Lavery Corp., which follows ASPE, leased equipment to Blossom Ltd., which follows IFRS 16. Both Lavery and Blossom have calendar year ends The following information concerns this lease. 1. The term of the non-cancellable lease is six years, with no renewal option. The equipment reverts to the lessor at the termination of the lease, at which time it is expected to have a residual value (not guaranteed) of $6,800. Blossom Ltd. depreciates all its equipment on a straight-line basis. 2. Equal rental payments are due on January 1 of each year, beginning in 2017. 3. The equipment's fair value on January 1, 2017 is $151,000 and its cost to Lavery is $111,000. 4. The equipment has an economic life of seven years. 5. Lavery set the annual rental to ensure a 12% rate of return. Blossom's incremental borr ing rate s 1 % and the essor milicit ate 6. unknown to e essee. Collectibility of lease payments is reasonably predictable and there are no important uncertainties about any unreimbursable costs that have not yet been incurred by the lessor. Using time value of money tables, a financial calculator, or Excel spreadsheet functions, calculate the amount of the annual rental payment. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 5,275.) Annual rental payment s SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINKTO TEXT Prepare all necessary journal entries and adjusting entries for Blossom for 2017. (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. Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record depreciation) (To record accrued interest) Prepare all necessary journal entries and adjusting entries for Lavery for 2017. (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, Record journal entries in the order presented in the problem. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit (To record inception of lease & cost of goods sold) To record receipt of lease payment) To record accrued interest)