Sunland Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2020. Annual rental payments of $49,000 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 $4,300, 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. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

Part 1

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

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Part 2

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.)

Sunland Steel Corporation (Lessee) Lease Amortization Schedule (Annuity Due Basis)
Date		Annual Lease Payment		Interest on Unpaid Liability		Reduction of Lease Liability		Balance of Lease Liability
1/31/20								$
1/31/20		$				$
1/31/21
1/31/22
1/31/23
1/31/24
1/31/25

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Part 3

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.)

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Part 4

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.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020
	(To record depreciation expense.)
Dec. 31, 2020
	(To record interest.)
Jan. 31, 2021
	(To record lease payment.)
During year		XXX
		XXX
			XXX
	(To record payment of insurance and repairs.)

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Part 5

Prepare any necessary adjusting journal entries at December 31, 2021, and the journal entry or entries that should be recorded on January 31, 2022, 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 answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2021
	(To record depreciation expense.)
Dec. 31, 2021
	(To record interest.)
Jan. 31, 2022
	(To record lease payment.)