Your employer, Wagner Inc., is a large Canadian public company that uses IFRS. You are working on
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(a) Based on the original information:
1. Using time value of money tables, a financial calculator, or computer spreadsheet functions, determine the contractual obligations and rights under the lease at July 1, 2011.
2. Prepare an amortization schedule for the obligation over the term of the lease.
3. Prepare the journal entries and any year-end (December 31) adjusting journal entries made by Wagner Inc. in 2011 and up to and including July 1, 2012.
(b) Immediately after the July 1, 2012 leased payments, based on the feedback of the staff in operations, management reassesses its expectations for the guaranteed residual value. Management now estimates the fleet of trucks to have a value of $400,000 with a 60% probability and $300,000 with a 40% probability.
1. Calculate the probability-weighted expected value of the residual at the end of the lease term. Also calculate the present value at July 1, 2012, of any additional cash flows related to the residual value guarantee.
2. Prepare any necessary entry to implement the revision to the contractual lease rights and obligation at July 1, 2012.
3. Revise the amortization schedule effective January 1, 2013, for the lease, including any liability related to the residual value guarantee.
4. Prepare the year-end adjusting journal entries made by Wagner Inc. for fiscal year 2012.
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Related Book For
Intermediate Accounting
ISBN: 978-0470161012
9th Canadian Edition, Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.
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