On January 1, 2020, Carla Vista Corp.which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement. 1. 2. 3. The agreement requires equal rental payments of $81,971 beginning on January 1, 2020. The lathe's fair value on January 1, 2020, is $500,000 The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $13,000. Carla Vista Corp. depreciates similar equipment using the straight-line method. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor. Carla Vista's incremental borrowing rate is 12% per year. The lessor's implicitrate is not known by Carla Vista Corp. The yearly rental payment includes $2.960.21 of executory costs related to insurance on the lathe. 4. 5. 6. Assume this is a manufacturer/dealer lease. Date Account Titles and Explanation Debit Debit Credit Credit 1/1/20 (To record lease payment.) 5/31/20 (To record depreciation expense.) 5/31/20 (To record interest.) 12/31/20 (To record expired insurance.) 1/1/21 (To record lease payment.) 5/31/21 (To record depreciation expense.) 5/31/21 (To record interest.) 12/31/21 (To record expired insurance.)