Sunland Dairy Ltd. leases its milk cooling equipment from Flounder Finance Corporation. Both companies use IFRS 16. The lease has the following terms.

1.		The lease is dated May 30, 2020, with a lease term of eight years. It is non-cancellable and requires equal rental payments of $30,100 due each May 30, beginning in 2020.
2.		The equipment has a fair value and cost at the inception of the lease of $212,748, an estimated economic life of 10 years, and a residual value (which is guaranteed by Lanier Dairy) of $23,300.
3.		The lease contains no renewal options and the equipment reverts to Flounder Finance Corporation on termination of the lease.
4.		Sunland Dairys incremental borrowing rate is 6% per year; the implicit rate is also 6%.
5.		Sunland Dairy uses straight-line depreciation for similar equipment that it owns.
6.		Collectibility of the payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor.

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Part 1

Using tables, a financial calculator, or Excel functions, calculate the PV of the lease payments and guaranteed residual value under the lease. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 5,275.)

PV of the lease payments and guaranteed residual value

$Enter your answer in accordance to the question statement

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Part 2

Prepare the journal entries for the lessee and lessor at May 30, 2020, and at December 31, 2020, which is the lessees and lessors 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 factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) Lessee:

Date	Account Titles and Explanation	Debit	Credit
May 30, 2020
	(To record inception of lease and first payment.)
Dec. 31, 2020
	(To record interest.)
Dec. 31, 2020
	(To record depreciation expense.)

Lessor:

Date	Account Titles and Explanation	Debit	Credit
May 30, 2020
	(To record inception of lease.)
May 30, 2020
	(Collection of lease payment.)
Dec. 31, 2020
	(To record interest.)

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Part 3

Prepare the journal entries at May 30, 2021 for the lessee and lessor. Assume reversing entries are not used. (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.) Lessee:

Date	Account Titles and Explanation	Debit	Credit
May 30, 2021
	(To record lease payment.)

Lessor:

Date	Account Titles and Explanation	Debit	Credit
May 30, 2021
	(To record interest.)
May 30, 2021
	(Collection of lease payment.)