On January 1, 2020, Sunland 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 $85,166 beginning on January 1, 2020.
2.		The lathes fair value on January 1, 2020, is $540,000.
3.		The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $16,000. Sunland 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.		Sunlands incremental borrowing rate is 11% per year. The lessors implicit rate is not known by Sunland Corp.
6.		The yearly rental payment includes $2,559.90 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 DUE.

Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, 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. (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 factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 5,275.25.)

Date	Account Titles and Explanation	Debit	Credit
1/1/20	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

Prepare an amortization schedule for the term of the lease to be used by Sunland. Use Excel. (Round answers to 2 decimal places, e.g. 5,275.25.)

SUNLAND CORP. Lease Amortization Schedule (Lessee)
Date		Annual Payment Excluding Executory Costs		Interest on Unpaid Obligation		Reduction of Lease Obligation		Balance of Lease Obligation
								$enter a dollar amount
Jan. 1, 2020		$enter a dollar amount				$enter a dollar amount		enter a dollar amount
Jan. 1, 2021		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2022		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2023		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2024		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2025		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2026		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2027		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2028		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Jan. 1, 2029		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
		$enter a total amount		$enter a total amount		$enter a total amount

Prepare the journal entries on Sunland 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. Sunland does not use reversing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.25.)

Date	Account Titles and Explanation	Debit	Credit
12/31/20	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	(To record depreciation expense.)
12/31/20	enter an account title to record interest	enter a debit amount	enter a credit amount
	enter an account title to record interest	enter a debit amount	enter a credit amount
	(To record interest.)
1/1/21	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	enter an account title to record lease payment	enter a debit amount	enter a credit amount
	(To record lease payment.)
12/31/21	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	enter an account title to record depreciation expense	enter a debit amount	enter a credit amount
	(To record depreciation expense.)
12/31/21	enter an account title to record interest	enter a debit amount	enter a credit amount
	enter an account title to record interest	enter a debit amount	enter a credit amount
	(To record interest.)