On January 1, 2020, Ivanhoe 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.		The agreement requires equal rental payments of $93,511 beginning on January 1, 2020.
2.		The lathes fair value on January 1, 2020, is $640,000.
3.		The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $15,000. Ivanhoe Corp. depreciates similar equipment using the straight-line method.
4.		The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor.
5.		Ivanhoes incremental borrowing rate is 9% per year. The lessors implicit rate is not known by Ivanhoe Corp.
6.		The yearly rental payment includes $2,020.31 of executory costs related to insurance on the lathe.

Assume this is a manufacturer/dealer lease. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Assume that Ivanhoes fiscal year end is May 31. Prepare the journal entries on Ivanhoe Corp.s books to reflect the signing of the lease agreement and to record payments and expenses related to this lease for the calendar years 2020 and 2021. Ivanhoe does not prepare reversing entries. (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 0 for the amounts. Round answers to 2 decimal places, e.g. 52.75.)

1/1/20 Right-of-Use Asset 640000 Insurance Expense 842 Prepaid Insurance 1179 Cash 93511 Lease Liability 548509 (To record lease payment) 5/31/20 Depreciation Expense 26667 Accumulated Depreciation - Right-of-Use Asset 26667 (To record depreciation expense.) 5/31/20 Interest Expense 20569 Lease Liability 20569 (To record interest.) 12/31/20 Insurance Expense 1179 Prepaid Insurance 1179 (To record expired insurance.) (To record expired insurance.) 1/1/21 Interest Expense 28797 Insurance Expense 842 Prepaid Insurance 1179 Lease Liability 62693 Cash 93511 (To record lease payment.) 5/31/21 Depreciation Expense 64000 Accumulated Depreciation-Right-of-Use Asset 64000 (To record depreciation expense.) 5/31/21 Interest Expense 1226.95 Lease Liability 1226.95 (To record interest.) 12/31/21 Insurance Expense 1179 Prepaid Insurance 1179 (To record expired insurance.)