The following facts pertain to a non-cancelable lease agreement between Faldo Leasing Company and Ivanhoe Company, a lessee. Commencement date January 1, Annual lease payment due at the beginning of each year, beginning with January 1, $118,626 Residual value of equipment at end of lease term, guaranteed by the lessee $54,000 Expected residual value of equipment at end of lease term $49,000 Lease term 6 years Economic life of leased equipment 6 years Fair value of asset at January 1, $641,000 Lessors implicit rate 7 % Lessees incremental borrowing rate 7 % The asset will revert to the lessor at the end of the lease term. The lessee uses the straight-line amortization for all leased equipment.

Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to o decimal places e.g. 5,275.) IVANHOE COMPANY (Lessee) Lease Amortization Schedule Annual Lease Interest on Reduction of Lease Date Payment Plus GRV Liability Liability Lease Liability 1/1/20 $ $ 1/1/20 1/1/21 1/1/22 1/1/23 1/1/24 1/1/25 12/31/26 $ Suppose Ivanhoe received a lease incentive of $5,000 from Faldo Leasing to enter the lease. How would the initial measurement of the lease liability and right-of-use asset be affected? Right-of-use asset $ Lease Liability $ What if Ivanhoe prepaid rent of $5,000 to Faldo? Right-of-use asset $ Lease Liability $