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on january 1, 2023, ivanhoe inc. enters into a 5-year non-cancellable lease with wilson Itd. for equipment that has an estimated useful life of 5 years and a fair value of $1,980,000. ivanhoe has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%. ivanhoe uses the straight-line depreciation method to depreciate assets. ivanhoe will make annual lease payments on january 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment, the lease agreement includes a guarantee that Ivanhoe will take over ownership of the equipment from Wilson for a final payment of $108,000, both companies adhere to IFRS. (a)

on january 1, 2023, ivanhoe inc. enters into a 5-year non-cancellable lease with wilson Itd. for equipment that has an estimated useful life of 5 years and a fair value of $1,980,000. ivanhoe has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%. ivanhoe uses the straight-line depreciation method to depreciate assets. ivanhoe will make annual lease payments on january 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment, the lease agreement includes a guarantee that Ivanhoe will take over ownership of the equipment from Wilson for a final payment of $108,000, both companies adhere to IFRS. (a)

FINANCIAL ACCOUNTING
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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on january 1, 2023, ivanhoe inc. enters into a 5-year non-cancellable lease with wilson ltd. for equipment that has an estimated useful life of 5 years and a fair value of $1,980,000. ivanhoe has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%. ivanhoe uses the straight-line depreciation method to depreciate assets. ivanhoe will make annual lease payments on january 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment. the lease agreement includes a guarantee that Ivanhoe will take over ownership of the equipment from Wilson for a final payment of $108,000. both companies adhere to IFRS. (a) * Your answer is incorrect. Calculate the lease payment Wilson Ltd. will charge Ivanhoe Inc assuming that there is no mark up on the fair value of the equipment. (Round present value factor calculations to 4 decimal places, e.g. 12.5124.) Click here to view the factor table. (b) Lease payment $ * Your answer is incorrect. 443438.5593 Calculate the present value of the minimum lease payments.(Round present value factor calculations to 4 decimal places, e.g. 12.5124.) Present value of lease payments $ 1899296.12
Transcribed Image Text:on january 1, 2023, ivanhoe inc. enters into a 5-year non-cancellable lease with wilson ltd. for equipment that has an estimated useful life of 5 years and a fair value of $1,980,000. ivanhoe has an incremental borrowing rate of 8% and Wilson's implicit rate is 6%. ivanhoe uses the straight-line depreciation method to depreciate assets. ivanhoe will make annual lease payments on january 1 of each year (with the first payment due at the beginning of the lease) based on the fair value of the equipment. the lease agreement includes a guarantee that Ivanhoe will take over ownership of the equipment from Wilson for a final payment of $108,000. both companies adhere to IFRS. (a) * Your answer is incorrect. Calculate the lease payment Wilson Ltd. will charge Ivanhoe Inc assuming that there is no mark up on the fair value of the equipment. (Round present value factor calculations to 4 decimal places, e.g. 12.5124.) Click here to view the factor table. (b) Lease payment $ * Your answer is incorrect. 443438.5593 Calculate the present value of the minimum lease payments.(Round present value factor calculations to 4 decimal places, e.g. 12.5124.) Present value of lease payments $ 1899296.12
(c) Present the journal entries that Ivanhoe Inc. would record during the first year of the equipment lease. (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 O for the amounts. List all debit entries before credit entries. Record journal entries in the order presented in the problem. Round answers to O decimal places, e.g. 5,275.) Date Jan. 1, 2023 Jan. 1, 2023 Dec. 31, 2023 v Account Titles and Explanation (To record depreciation expense) (To record interest) Debit Credit
Transcribed Image Text:(c) Present the journal entries that Ivanhoe Inc. would record during the first year of the equipment lease. (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 O for the amounts. List all debit entries before credit entries. Record journal entries in the order presented in the problem. Round answers to O decimal places, e.g. 5,275.) Date Jan. 1, 2023 Jan. 1, 2023 Dec. 31, 2023 v Account Titles and Explanation (To record depreciation expense) (To record interest) Debit Credit
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