Modern Office Solutions Inc leases most of its office furniture and equipment On January 1, 2020, Modern entered into a five year lease for new equipment The payments are to be made at the beginning of each lease year Modern has the option of purchasing the equipment at the end of the lease The present value of the minimum lease payments is equal to the fair value of the equipment at lease inception Modern follows IFRS Other information is as follows Fair value of the equipment at lease inception$ $75,000 Expected value at the end of the lease 16,000 Purchase option price (expected to be exercised) 8,000 Interest rate implicit in the lease (known to Modern) 12 Moderns incremental borrowing rate 11 Expected useful life of the equipment 8 years Residual value at the end of 8 years $2,000 Amortization method for equipment Straight line Lease payments Show all calculations Round all amounts to the nearest dollar Calculate the annual lease payments required based on the information given above Round to the nearest dollar Prepare all journal entries required by Modern to account for the lease for the year ending December 31, 2020 Provide a brief explanation for each journal entry What amounts relating to this lease and leased asset will appear on Moderns statement of financial position at December 31, 2020 Be specific about the classifications that should be used

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Posted on Sep 17, 2024

Modern Office Solutions Inc. leases most of its office furniture and equipment. On January 1, 2020, Modern entered into a five-year lease for new equipment.

Modern Office Solutions Inc. leases most of its office furniture and equipment.

On January 1, 2020, Modern entered into a five-year lease for new equipment. The payments are to be made at the beginning of each lease year. Modern has the option of purchasing the equipment at the end of the lease. The present value of the minimum lease payments is equal to the fair value of the equipment at lease inception. Modern follows IFRS.

Other information is as follows:

Fair value of the equipment at lease inception$	$75,000
Expected value at the end of the lease	16,000
Purchase option price (expected to be exercised)	8,000
Interest rate implicit in the lease (known to Modern)	12%
Moderns incremental borrowing rate	11%
Expected useful life of the equipment	8 years
Residual value at the end of 8 years	$2,000

Amortization method for equipment Straight line

Lease payments ?

Show all calculations. Round all amounts to the nearest dollar.

Calculate the annual lease payments required based on the information given above. Round to the nearest dollar.

Prepare all journal entries required by Modern to account for the lease for the year ending December 31, 2020. Provide a brief explanation for each journal entry.

What amounts relating to this lease and leased asset will appear on Moderns statement of financial position at December 31, 2020? Be specific about the classifications that should be used.