Kingbird Corp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease equipment from Labelle Ltd. The following information concerns the lease agreement.

1.		The equipments fair value on July 1, 2020 is $268,000.
2.		The agreement requires equal rental payments of $56,300 beginning on July 1, 2020.
3.		The equipment has an estimated economic life of 5 years, with an unguaranteed residual value of $83,600. Kingbird Corp. depreciates similar equipment using the straight-line method, with no residual value.
4.		The lease is non-renewable. At the termination of the lease, the equipment reverts to Labelle.
5.		Kingbirds incremental borrowing rate is 7% per year. The lessors implicit rate is not known by Kingbird Corp.
6.		The yearly rental payment includes $2,220.83 of executory costs related to insurance on the equipment

Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, 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 0 decimal places, e.g. 5,275.)

The amount of the right-of-use asset

$

Prepare the initial entry to reflect the signing of the lease agreement. (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.)

Prepare the subsequent journal entries on Kingbird Corp.s books to record the payments and expenses related to this lease for the years 2020 and 2021 as well as any adjusting journal entries at its fiscal year ends of December 31, 2020 and 2021. Kingbird 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 titles and enter 0 for the amounts. Round answers to 2 decimal places, e.g. 5,125.76.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2020June 30, 2021July 1, 2021Dec. 31, 2021

(To record insurance expense)

(To record depreciation)

(To record interest)

Dec. 31, 2020June 30, 2021July 1, 2021Dec. 31, 2021

July 1, 2021

Dec. 31, 2020June 30, 2021July 1, 2021Dec. 31, 2021

(To record insurance expense)

(To record depreciation)

(To record interest)