Oakridge Leasing Corporation signs an agreement on January 1, 2020, to lease equipment to Ivanhoe Limited. Oakridge and Ivanhoe follow ASPE. The following information relates to the agreement. 1. The term of the non-cancellable lease is five years, with no renewal option. The equipment has an estimated economic life of six years. 2. The asset's fair value at January 1, 2020, is $85,000. 3. 4. 4 The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, which is guaranteed. Ivanhoe Limited assumes direct responsibility for all executory costs, which include the following annual amounts: $930 to Rocky Mountain Insurance Ltd. for insurance and $1,650 to James Township for property taxes. The agreement requires equal annual rental payments of $20,431 to Oakridge, the lessor, beginning on January 1, 2020. The lessee's incremental borrowing rate is 14%. The lessor's implicit rate is 13% and is known to the lessee. 5 5. 6. 7. Ivanhoe Limited uses the straight-line depreciation method for all equipment. 8. Ivanhoe uses reversing entries when appropriate. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE. (a) Your answer is incorrect. Calculate the PV of the future minimum lease payments using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel functions. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to decimal places, e.g. 1,452.) Present Value $ Save for Later Attempts: 1 of 2 used Submit Answer Prepare an amortization schedule for Ivanhoe Limited for the lease term. Use Excel. (Hint: You may find the ROUND formula helpful for rounding in Excel.) (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to decimal places, e.g. 1,452.) Ivanhoe Limited (Lessee) Lease Amortization Schedule Annual Lease Payment Interest on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligation $ $ Prepare all of Ivanhoe's journal entries for 2020 to record the lease agreement and the lease payments. LeBlanc's accounting period ends on December 31. Ignore payments of insurance and property taxes. (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, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/20 (To record inception of lease and first lease payment.) 12/31/20 (To record interest.)