On January 1, 2021, Fine Corp, which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty loom from Sheffield Corporation. The following information concerns the lease agreement. The agreement requires equal rental payments of $73,580 beginning on January 1, 2021. The loom's fair value on January 1, 2021 is $450,000. The loom has an estimated economic life of 12 years, with an unguaranteed residual value of $12,000. Fine Corp. depreciates similar equipment using the straight-line method. The lease is non-renewable. At the termination of the lease, the loom reverts to the lessor. Fine's incremental borrowing rate is 12% per year. The lessor's implicit rate is not known by Fine Corp. vi. The yearly rental payment includes $2,470.29 of executory costs related to insurance on the loom. Instructions Prepare an amortization schedule for the term of the lease to be used by Fine. Prepare the journal entries on Fine Corp's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2021 and 2022 as well as any adjusting journal entries at its fiscal year ends of December 31, 2021 and 2022.

On January 1, 2021, Fine Corp, which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty loom from Sheffield Corporation. The following information concerns the lease agreement. The agreement requires equal rental payments of $73,580 beginning on January 1, 2021. The loom's fair value on January 1, 2021 is $450,000. The loom has an estimated economic life of 12 years, with an unguaranteed residual value of $12,000. Fine Corp. depreciates similar equipment using the straight-line method. The lease is non-renewable. At the termination of the lease, the loom reverts to the lessor. Fine's incremental borrowing rate is 12% per year. The lessor's implicit rate is not known by Fine Corp. vi. The yearly rental payment includes $2,470.29 of executory costs related to insurance on the loom. Instructions Prepare an amortization schedule for the term of the lease to be used by Fine. Prepare the journal entries on Fine Corp's books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2021 and 2022 as well as any adjusting journal entries at its fiscal year ends of December 31, 2021 and 2022.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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