The following selected transactions of AMB Limited (a Canadian private corporation) were completed during the fiscal year ended December 31, 2020 and the month of January, 2021: Mar. 1 Borrowed cash (you need to calculate the amount of cash borrowed!) by signing a $20,000, one year, non-interest bearing note. The market rate of interest on similar types of debt was 8% at this time. Nov. 1 AMB Limited decided to run a special promotion wherein one coupon was given to customers with the purchase of an espresso machine. Upon redemption of the coupon plus $5.00, the consumer would receive a limited-edition Starbucks mug. It is estimated that 80% of the coupons will be presented for redemption. Excited with the prospects of this new promotion, AMB purchased 500 of the mugs on credit from Starbucks at a cost of $11.25 per mug. The promotion is set to begin on December 1. Dec. 1 AMB Limited decided to rent out spare office space at $2,000 per month and collected rent for the month of December plus the last months rent deposit. Dec. 5 Paid Starbucks for the full amount owing. Dec. 31 AMB Limited records all of its sales at the end of the month. As at December 31, 400 espresso machines had been sold at $2,000 each for cash, which includes a 2- year warranty that requires the company to perform periodic services and to replace defective parts. Warranty costs are estimated to be 5% of sales in the first year, and 7% in the second year, subsequent to sale. As of yet, AMB Limited has not incurred any warranty costs. (Ignore the COGS entry for sales) Dec. 31 The promotion ran for the entire month of December. As at December 31, only two of the coupons had been redeemed, however AMB Limited is still hopeful that it will continue to incentivize sales for the espresso machine! The company has opted to use the expense approach. Two entries here: You must record the liability AND the coupon redemption. You can opt for this to be one entry. (HINT: you will have a debit to cash with the coupon redemption.) Jan 31 AMB Limited pays its employees on a monthly basis on the last day of every month. The gross salaries earned by the employees for the month of January were $195,000. CPP is withheld at a rate of 5.25% of gross earnings, EI is withheld at a rate of 1.58% of gross earnings. Income taxes withheld for the month of January was $40,000. Feb. 15 Paid the amount due to the Receiver General for January payroll. Mar. 1 Paid the note payable that was signed March 1, 2020. Instructions: Prepare journal entries to record all of the above transactions for 2020 and 2021, including all necessary year-end adjusting entries for the year ended December 31, 2020. You must provide detailed notes (calculations) to support the amounts in your journal entries to be eligible for full marks. Ignore GST/HST implications. Question 2 (20 marks) Dewey Cheatum Corporation (DCC) signed a five-year non-cancellable lease for a piece of machinery on September 1, 2020. The terms of the lease call for DCC to make annual payments of $13,668 at the beginning of each lease year, starting on September 1, 2020. The fair value of the machinery on Sept 1, 2020 was $79,000. The machinery has an economic life of seven years and reverts back to the lessor at the end of the lease term. DCC uses the straight-line method of depreciation for all of its plant assets, has a calendar year end. DCCs incremental borrowing rate is 10%, and the lessors implicit rate is unknown. DCC adheres to ASPE reporting standards. Instructions: a) Calculate the PV of the future lease payments. b) Using the ASPE criteria, explain what type of lease this is (i.e. capital or operating). Evaluate ALL of the criteria (there are three) based on the information provided above. structure your response in this way to be eligible for full marks: Criteria (this is a copy/paste) Indicate whether the criteria is met or not met Using information from the above question, explain why it is met or not met. Once you have completed the evaluation, provide your conclusion as to the treatment (Capital or operating). c) Prepare all of the necessary journal entries for Dewey Cheatum Corporation for this lease, based on your reasoning in part (b) for 2020 only, including any year-end adjusting entries (if there are any).