On January 1, 2020, Fargo Corp, enters into a 10 year non-cancellable lease with wells Llis for equipment having an estimated useful life of 11 years and a fair value of $6,000,000. Fargo's incremental borrowing rate is 8%, but they do not know Wells' implich rate. Fargo uses the straight-line method to depreciate assets. The lease contains the following provisions: 1 Sem-annual lease payments of $400,000 payable on January 1 and July 1 of each year 2. A guarantee by Fargo Corp, that Wells Lid will realize $200,000 residual value from selling the asset at the expiration of the lease Both companies adhere to ASPE REQUIRED: a) (2\%) Calculate the undiscounted totaliol lease payments over the life of the lease b) (5%) Calculate the present value of the minimum lease payments. PV tactor for annuity due of 20 semiannual payments at 8% annual rate, 14.13394. PV factor for $1 due in 20 interest periods at 8% annual rate, 45639 Round to nearest dollar or il you prefer you can use financial calculator c) (2%) What kind of lease is this to Fargo Corp 2 Why? d) (5\%) Prepare an amortization schedule up to danuary 2021 e) (10\%) Present the journal entries that Fargo would record during the first year of the lease f) (2%) What would be your answer to part cit they followed IFRS? 9) (2\%) If they followed IFRS would any journal entries change? Briefly describe no need of redong joumal entries just indicate at least 2 account names that would change and what they would be On January 1, 2020, Fargo Corp, enters into a 10 year non-cancellable lease with Wells Lld for equipment having an estirnated useful life of 11 years and a fair value of $6,000,000. Fargo's incremental borrowing rate is 8%, but they do not know Wells' implicit rate Fargo uses. the straight-fine method to depreciate assets. The lease contains the following provisions. 1 Semi-arnual lease payments of $400,000 payable on January 1 and July 1 of each year. 2. A guarantee by Fargo Corp. that Wells Ltd will realize $200,000 residual value from selling the asset at the expiration of the lease. Both companies adhere to ASPE REQUIRED: a) (2%) Calculate the undiscounted total of lease payments over the life of the lease. b) (5\%) Calculate the present value of the minimum lease payments. PV factor for annuity due of 20 semiannual payments at 8% annual rate, 14.13394. PV factor for $1 due in 20 interest periods at 8% annual rote, 45639 . Round to nearest dollar or if you prefer you can use financial calculator. c) (2\%)What kind of lease is this to Fargo Corp? Why? d) (5\%) Prepare an amortization schedule up to January 2021 e) (10%) Present the journal entries that Fargo would record during the first year of the lease. f) (2\%)What would be your answer to part c if they followed IFRS? g) (2\%) If they followed IFRS would any journal entries change? Briefly describe no need of redoing joumal entries just indicate at least 2 account names that would change and what they would be On January 1, 2020, Fargo Corp, enters into a 10 year non-cancellable lease with wells Llis for equipment having an estimated useful life of 11 years and a fair value of $6,000,000. Fargo's incremental borrowing rate is 8%, but they do not know Wells' implich rate. Fargo uses the straight-line method to depreciate assets. The lease contains the following provisions: 1 Sem-annual lease payments of $400,000 payable on January 1 and July 1 of each year 2. A guarantee by Fargo Corp, that Wells Lid will realize $200,000 residual value from selling the asset at the expiration of the lease Both companies adhere to ASPE REQUIRED: a) (2\%) Calculate the undiscounted totaliol lease payments over the life of the lease b) (5%) Calculate the present value of the minimum lease payments. PV tactor for annuity due of 20 semiannual payments at 8% annual rate, 14.13394. PV factor for $1 due in 20 interest periods at 8% annual rate, 45639 Round to nearest dollar or il you prefer you can use financial calculator c) (2%) What kind of lease is this to Fargo Corp 2 Why? d) (5\%) Prepare an amortization schedule up to danuary 2021 e) (10\%) Present the journal entries that Fargo would record during the first year of the lease f) (2%) What would be your answer to part cit they followed IFRS? 9) (2\%) If they followed IFRS would any journal entries change? Briefly describe no need of redong joumal entries just indicate at least 2 account names that would change and what they would be On January 1, 2020, Fargo Corp, enters into a 10 year non-cancellable lease with Wells Lld for equipment having an estirnated useful life of 11 years and a fair value of $6,000,000. Fargo's incremental borrowing rate is 8%, but they do not know Wells' implicit rate Fargo uses. the straight-fine method to depreciate assets. The lease contains the following provisions. 1 Semi-arnual lease payments of $400,000 payable on January 1 and July 1 of each year. 2. A guarantee by Fargo Corp. that Wells Ltd will realize $200,000 residual value from selling the asset at the expiration of the lease. Both companies adhere to ASPE REQUIRED: a) (2%) Calculate the undiscounted total of lease payments over the life of the lease. b) (5\%) Calculate the present value of the minimum lease payments. PV factor for annuity due of 20 semiannual payments at 8% annual rate, 14.13394. PV factor for $1 due in 20 interest periods at 8% annual rote, 45639 . Round to nearest dollar or if you prefer you can use financial calculator. c) (2\%)What kind of lease is this to Fargo Corp? Why? d) (5\%) Prepare an amortization schedule up to January 2021 e) (10%) Present the journal entries that Fargo would record during the first year of the lease. f) (2\%)What would be your answer to part c if they followed IFRS? g) (2\%) If they followed IFRS would any journal entries change? Briefly describe no need of redoing joumal entries just indicate at least 2 account names that would change and what they would be
