Ivanhoe Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2020. Annual rental payments of $42.000 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%; Ivanhoe's incremental borrowing rate is 10%. Ivanhoe is unaware of the rate being used by the lessor. At the end of the lease, Ivanhoe has the option to buy the equipment for $4,600, which is considerably below its estimated fair value at that time. The equipment has an estimated useful life of seven years with no residual value. Ivanhoe uses straight-line depreciation on similar equipment that it owns and follows 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. Part 1 Using time value of money tables, a financial calculator or Excel functions, calculate the PV of the lease obligation. (Round factor values to 5 decimal places, c8.1.25124 and final answer to decimal places, ep.5,275.) Present value S Prepare the lease amortization schedule for the lease. (Hint: You may find the ROUND formula helpful for rounding in Excel.) (Round answers to decimal places, eg. 5,275.) Ivanhoe Steel Corporation (Lessee) Lease Amortization Schedule (Annuity Due Basis) Interest Reduction on Unpaid of Lease Liability Liability Annual Lease Payment Balai of Le Liabi Date 1/31/20 S 1/31/20 $ s 1/31/21 1/31/22 1/31/23 1/31 24 1/31 25 Part 3 Prepare the journal entry that should be recorded on January 31, 2020, by Ivanhoe. (Credit account titles are automatically Indented when the amounth entered. Do not indent manually no entry is required, select "No Enby for the account titles and entero for the amounts. Round factor values to decimal placeres 125124 and final answers to decimal places 5.275.) Date Account Titles and Explanation Debit Credit Jan 31 2020 an To record inception of fease ad first case payment 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 Ivanhoe, Ivanhoe does not use 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 title and enter for the amounts. Round answers to decimal places, 50275) Account Titles and Explanation Date Dec 31 2070 Debit Credit (To record depreciation expense) Dec 31 2020 (To record interest tan 31 2007 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 Ivanhoe. (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 for the amounts. Round answers to decimal places, eg. 5,275.) Account Titles and Explanation Debit Credit Date Dec. 31. 2021 (To record depreciation expense.) Dec. 31. 2021 (To record interest.) Jan. 31 2022
