Question 1

On January 1, 2020,CoronadoLtd. entered into an agreement to lease a truck fromWhispering WindsLtd. BothCoronadoandWhispering Windsuse IFRS 16. The details of the agreement are as follows:

Carrying value of truck forWhispering WindsLtd.$22,336Fair value of truck$22,336Economic life of truck5 yearsLease term3 yearsRental payments (at beginning of each month)$680Executory costs included in rental payments each month for insurance$25Incremental borrowing rate forCoronadoLtd.12%CoronadoLtd. expects to payWhispering WindsLtd. $3,460under a residual value guarantee for the truck.

Additional information:

1.There are no abnormal risks associated with the collection of lease payments fromCoronado.2.There are no additional unreimbursable costs to be incurred byWhispering Windsin connection with the leased truck.3.At the end of the lease term,Whispering Windssold the truck to a third party for $3,115, which was the truck's fair value at December 31, 2022.CoronadopaidWhispering Windsthe difference between the guaranteed residual value of $3,460and the proceeds obtained on the resale.4.Coronadoknows the interest rate that is implicit in the lease.5.Coronadoknows the amount of executory costs included in the minimum lease payments.6.Coronadouses straight-line depreciation for its trucks with the residual value guarantee of $3,460for the leased truck.

Prepare the journal entries thatWhispering Windswould make on January 1, 2020, and the adjusting journal entries at December 31, 2020, to record the annual interest income from the lease arrangement, assuming thatWhispering Windshas a December 31 fiscal year end.(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 0 decimal places, e.g. 5,275.)

Date Account Titles and Explanation Debit Credit

Jan. 1, 2020

Dec. 31, 2020

(To record interest.)

Dec. 31, 2020

(To record accrued interest.)

Question 2

FlintLimited has signed a lease agreement with Lantus Corp. to lease equipment with an expected lifespan of eight years, no estimated salvage value, and a cost to Lantus, the lessorof $230,000. The terms of the lease are as follows:

The lease term begins on January 1, 2019, and runs for 5 years.

The lease requires payments of $52,425at the beginning of each year starting January 1, 2019.

At the end of the lease term, the equipment is to be returned to the lessor.

Lantus' implied interest rate is7%, whileFlint's borrowing rate is8%.Flintuses straight-line depreciation for similar equipment. The year-end for both companies is December 31.

Assume that both companies follow ASPE.

Click here to view the factor table PRESENT VALUE OF 1.

Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

Determine the present value of the minimum lease payments.(Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Present Value = $

Enter your answer in accordance to the question statement

Question 3

BlossomCorporation purchased a piece of equipment for $88,000. Blossom wanted to lease out the equipment to a customer for5years, at the end of which time the customer could purchase the equipment for $4,800(at a time when its fair value would be $5,760). Annual payments on the lease would be due at the beginning of each year.

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.

In order to earn a12% return, what minimum lease payments should Blossom charge its customer for this equipment lease?(Round factor values to 5 decimal places, e.g. 1.25124. Round answer to 0 decimal places, e.g. 5,275.)

Minimum lease payments =$

Enter your answer in accordance to the question statement

Question 4

GrouperCorp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease equipment from Labelle Ltd. The following information concerns the lease agreement.

1.The equipment's fair value on July 1, 2020 is $268,000.

2.The agreement requires equal rental payments of $56,300beginning on July 1, 2020.

3.The equipment has an estimated economic life of 5 years, with an un-guaranteed residual value of $83,600.GrouperCorp. depreciates similar equipment using the straight-line method, with no residual value.

4.The lease is non-renewable. At the termination of the lease, the equipment reverts to Labelle.

5.Grouper's incremental borrowing rate is7% per year. The lessor's implicit rate is not known byGrouperCorp.

6.The yearly rental payment includes $2,220.83of executory costs related to insurance on the equipment.

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.(Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

The amount of the right-of-use asset = $

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.)

Date Account Titles and Explanation Debit Credit

July 1, 2020

Prepare the subsequent journal entries onGrouperCorp.'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.Grouperdoes not use 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. 5,125.76.)

Date Account Titles and Explanation Debit Credit

Dec. 31, 2020

June 30, 2021

July 1, 2021

Dec. 31, 2021

(To record insurance expense)

(To record depreciation)

(To record interest)

Dec. 31, 2020

June 30, 2021

July 1, 2021

Dec. 31, 2021

July 1, 2021

Dec. 31, 2020

June 30, 2021

July 1, 2021

Dec. 31, 2021

(To record insurance expense)

(To record depreciation)

(To record interest)