Sunland Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2020. Annual rental payments of $50,000 are to be made at the beginning of each lease year (January 31). The insurance and repairs and maintenance costs are the lessees obligation. The interest rate used by the lessor in setting the payment schedule is 9%; Sunlands incremental borrowing rate is 10%. Sunland is unaware of the rate being used by the lessor. At the end of the lease, Sunland has the option to buy the equipment for $3,900, which is considerably below its estimated fair value at that time. The equipment has an estimated useful life of seven years with no residual value. Sunland uses straight-line depreciation on similar equipment that it owns, and follows IFRS 16.

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

Present value

$Enter your answer in accordance to the question statement

Prepare the lease amortization schedule for the lease. (Hint: You may find the ROUND formula helpful for rounding in Excel.) (Round answers to 0 decimal places, e.g. 5,275.)

Prepare the journal entry that should be recorded on January 31, 2020, by Sunland. (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.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 31, 2020
	(To record inception of lease and first lease payment.) Prepare any necessary adjusting journal entries at December 31, 2020, and the journal entry or entries that should be recorded on January 31, 2021, by Sunland. Sunland does 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 0 decimal places, e.g. 5,275.) What amounts would appear on Sunlands December 31, 2021 SFP relative to the lease arrangement? (Round answers to 0 decimal places, e.g. 5,275.) Assume that the leased equipment had a fair value of $200,000 at the inception of the lease, and that no bargain purchase option is available at the end of the lease. Would your treatment of the lease change for financial reporting purposes? The lease would be accounted as a Choose the answer from the menu in accordance to the question statement lease liabilityright-of-use asset and lease liabilityright-of-use assetoperating lease.