its financial statements for the fiscal year

P$20\mathrm{.}14$ Dubois Steel Corporation, as lessee, signed a lease agreement for equipment for five years,

beginning January $31,2020.$ Annual rental payments of $$41,000$ are to be made at the beginning

of each lease year $($January $31).$ The insurance and repairs and maintenance costs are the lessee's

obligation. The interest rate used by the lessor in setting the payment schedule is $9\%$; Dubois's in$-$

cremental borrowing rate is $10\%.$ Dubois is unaware of the rate being used by the lessor. At the end

of the lease, Dubois has the option to buy the equipment for $$4,000,$ which is considerably below its

stimated fair value at that time. The equipment has an estimated useful life of seven years with no

residual value. Dubois uses straight$-$line depreciation on similar equipment that it owns, and follows

IFRS $16.$

Instructions

Answer the following questions, rounding all numbers to the nearest dollar.

a$.$ Using $(1)$ time value of money tables, $(2)$ a financial calculator, or $(3)$ Excel functions, calculate the

PV of the lease obligation.

b$.$ Prepare the lease amortization schedule for the lease. $($Hint: You may find the ROUND formula

helpful for rounding in Excel.$)$

c$.$ Prepare the journal entry or entries that should be recorded on January $31,2020,$ by Dubois.

d$.$ Prepare any necessary adjusting journal entries at December $31,2020,$ and the journal entry or

entries that should be recorded on January $31,2021,$ by Dubois. Dubois does not use reversing

entries.

e$.$ Prepare any necessary adjusting journal entries at December $31,2021,$ and the journal entry or entries

that should be recorded on January $31,2022,$ by Dubois.

f$.$ What amounts would appear on Dubois's December $31,2021$ SFP relative to the lease arrangement?

g$.$ What amounts would appear on Dubois's statement of cash flows for $2020$ relative to the lease

arrangement? Provide the classification of the amounts reported.

h$.$ Assume that the leased equipment had a fair value of $$200,000$ at the inception of the lease, and that

no bargain purchase option is available at the end of the lease. Would your treatment of the lease

change for financial reporting purposes?