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Question 5 (12 points) On December 31, 2019 Natasha Romanoff Corp. (NRC) entered into a lease to rent construction equipment that had the following terms:
Question 5 (12 points) On December 31, 2019 Natasha Romanoff Corp. (NRC) entered into a lease to rent construction equipment that had the following terms: - NRC's incremental borrowing rate is 8%: prime rate is 6%; and the implicit rate known by NRC is 9% The equipment's fair value on December 31, 2019 is $250,000 with a useful life of eight years and a residual value guarantee of $50,000; The lease term is for a period of five years with annual payments at the beginning of the year: The asset reverts back to the lessor at the end of the lease term and the expected payment under the guarantee is $20,000. Required: 1. Calculate the annual lease payment required by NRC (2 marks) 2. Calculate the lease liability of the lessee (Present Value) (2 marks) 3. Prepare the journal entry for December 31, 2019 (3 marks) 4. Prepare the journal entries for December 31, 2020 year-end
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