Required information This question has 3 parts. The information for the question will be repeated for each part. Please keep in mind you may need your answers from one part, to solve the next part. Question: Modern Office Solutions Inc. leases most of its office furniture and equipment. On January 1, 2021, Modern entered into a five year lease for new equipment. The first payment is to be made at the beginning of the lease and each subsequent payment on December 31. Modern has the option of purchasing the equipment at the end of the lease. The present value of the minimum lease payments is equal to the fair value of the equipment at lease inception Other information is as follows: Fair value of the equipment at lease inception $75,000 Expected value at the end of the lease 16,000 Purchase option price (expected to be exercised) 8,000 Interest rate implicit in the lease (known to Modern) 12% Modern's incremental borrowing rate 11% Expected useful life of the equipment 8 years Residual value at the end of 8 years $2.0 Amortization method for equipment Straight line Lease payments Required: A. Calculate the annual lease payments required based on the information given above. Round to the nearest dollar. (3 marks) Show all calculations (FV of $1. PV of $1. FVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) (Enter amounts as positive values rounded to the nearest whole dollar.) Purchase Option Table or calculator function Prement Value Amount to be recovered (fair value) Purchase option Amount to be recovered through periodic lease payments Required: A. Calculate the annual lease payments required based on the information given above. Round to the nearest dollar. (3 marks) Show all calculations (Ey of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) (Enter amounts as positive values rounded to the nearest whole dollar.) Purchase Option Table or calculator function Present Value Amount to be recovered (fair value) Purchase option Amount to be recovered through periodic lease payments Lease Payment Table or calculator function na 1 Lease Payments Amount of fair value recovered each lease payment Required: B. Prepare all journal entries required by Modern to account for the lease for the year ending December 31, 2021 (Marks) (FV of $1.py of S1, EVA of S1, PVA of S.I. FVAD 0f $1 and PVAD of $1) (Use appropriate factor(e) from the tables provided.) Complete this question by entering your answers in the tabs below. Prepare all journal entries required by Modern to account for the lease for the year ending December 31, 2021. (Round your intermediate and final answers to the nearest whole dollar amount. If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.) View transaction list X 1 Record the lease. 2 Record the cash payment. 3 Record amortization of the right-of-use asset for Modern. 4 Record lease payment. Credit Note : - Journal entry has been entered View general journal Clear entry Record entry Required: C. What amounts relating to this lease and leased asset will appear on Modern's statement of financial position at December 31, 2021? Be specific about the classifications that should be used. (4 marks) Complete this question by entering your answers in the tabs below. C. What amounts relating to this lease and leased asset will appear on Modern's statement of financial position (Balance sheet) at December 31, 2021? Be specific about the accounts that should be used. (4 marks) Modem Office Solutions Inc. Statement of Financial Position At December 31, 2021 Capital Assests Right of Use Asset Acc Depreciation R-O-U Asset Right of use Asset, net Current Liabilites Lease Liability - current portion Non-Current Liabilities Lease Liability - non-current Total Liabilities
