On July 1, 2023, Blossom Corp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease a equipment from Wildhorse Ltd. The following information concerns the lease agreement 1 2 3. 4 The equipment's fair value on July 1, 2023 is $292,000. The agreement requires equal rental payments of $59,600.00 beginning on July 1, 2023. The equipment has an estimated economic life of 5 years, with an unguaranteed residual value of $80,100. Blossom Corp. depreciates similar equipment using the straight-line method, with no residual value. The lease is non-renewable. At the termination of the lease, the equipment reverts to Wildhorse. 5. Blossom's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Blossom Corp. The yearly rental payment includes $1,60945 of executory costs related to insurance on the equipment. 6. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount Blossom Corp will record for the right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, es 5,275.76) The amount of the right-of-use asset Prepare the initial entry to reflect the signing of the lease agreement. (List all debit entries before credit entries. 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. Round answers to 2 decimal places, eg. 5,125,76)
On July 1, 2023, Blossom Corp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease a equipment from Wildhorse Ltd. The following information concerns the lease agreement 1 2 3. 4 The equipment's fair value on July 1, 2023 is $292,000. The agreement requires equal rental payments of $59,600.00 beginning on July 1, 2023. The equipment has an estimated economic life of 5 years, with an unguaranteed residual value of $80,100. Blossom Corp. depreciates similar equipment using the straight-line method, with no residual value. The lease is non-renewable. At the termination of the lease, the equipment reverts to Wildhorse. 5. Blossom's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Blossom Corp. The yearly rental payment includes $1,60945 of executory costs related to insurance on the equipment. 6. Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount Blossom Corp will record for the right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, es 5,275.76) The amount of the right-of-use asset Prepare the initial entry to reflect the signing of the lease agreement. (List all debit entries before credit entries. 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. Round answers to 2 decimal places, eg. 5,125,76)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vinubhai
Transcribed Image Text:On July 1, 2023, Blossom Corp., which uses IFRS, signs a 4-year, non-cancellable lease agreement to lease a equipment from
Wildhorse Ltd. The following information concerns the lease agreement.
1
2
3.
4.
5.
6.
The equipment's fair value on July 1, 2023 is $292,000.
The agreement requires equal rental payments of $59,600.00 beginning on July 1, 2023.
The equipment has an estimated economic life of 5 years, with an unguaranteed residual value of $80,100. Blossom Corp.
depreciates similar equipment using the straight-line method, with no residual value.
The lease is non-renewable. At the termination of the lease, the equipment reverts to Wildhorse.
Blossom's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Blossom Corp.
The yearly rental payment includes $1,609.45 of executory costs related to insurance on the equipment.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE
Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount Blossom Corp will record for the
right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g.
5,275.76)
The amount of the right-of-use asset
Prepare the initial entry to reflect the signing of the lease agreement. (List all debit entries before credit entries. 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. Round answers to 2 decimal places, eg. 5,125,76)
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