On January 1, 2020, Acme Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty oven from Base Inc.

The following information concerns the lease agreement.

The agreement requires equal rental payments of $73,580 beginning on January 1, 2020.

The ovens fair value on January 1, 2020, is $450,000.

The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $12,000. Acme Corp. depreciates similar equipment using the straight-line method.

The lease is non-renewable. At the termination of the lease, the oven reverts to the lessor.

Acmes incremental borrowing rate is 12% per year. The lessors implicit rate is not known by Acme Corp.

The yearly rental payment includes $2,470.29 of executory costs related to insurance on the oven.

Required:

a. (5 marks) Calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement.

b. (10 marks) Prepare an amortization schedule for the term of the lease to be used by Acme. Round to the nearest cent.

Date	Annual Payment (excluding Executory Costs)	Interest on unpaid liability	Reduction on Lease liability	Balance of lease

c. (5 marks) Prepare the journal entries on Acme 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. Acme does not use reversing entries.