On January 1, 2021, Fine Corp, which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty loom from Sheffield Corporation. The following information concerns the lease agreement.

The agreement requires equal rental payments of $73,580 beginning on January 1, 2021.

The looms fair value on January 1, 2021 is $450,000.

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

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

Fines incremental borrowing rate is 12% per year. The lessors implicit rate is not known by Fine Corp. vi. The yearly rental payment includes $2,470.29 of executory costs related to insurance on the loom.

Instructions

Prepare an amortization schedule for the term of the lease to be used by Fine.

Prepare the journal entries on Fine Corp.s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2021 and 2022 as well as any adjusting journal entries at its fiscal year ends of December 31, 2021 and 2022.