Problem 4On January 2, 2023, Fields 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 $2,000,000. Fields has an incremental borrowing rate of 8% and Wilson’s implicit rate is 6%. Fields uses the straight-line depreciation method to depreciate assets. Fields will make annual lease payments of $431,182 on January 2 of each year (with the first payment due at the beginning of the lease) The lease agreement includes a guarantee that Fields will take over ownership of the equipment from Wilson for a final payment of $100,000. Both companies adhere to IFRS. Both company have a December 31 year end. Fields is aware of the implicit rate in the lease.Instructionsa) Present the journal entries that Fields Inc. would record during the first year of the equipment lease. Round to the nearest dollar. (January 2, 2023 through to January 2, 2024)b) Prepare the journal entries that Wilson Ltd. would record in the first year assuming that this is a finance lease. Round to the nearest dollar. (January 2, 2023 through to January 2, 2024)
Problem 4
On January 2, 2023, Fields 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 $2,000,000. Fields has an incremental borrowing rate of 8% and Wilson’s implicit rate is 6%. Fields uses the
Instructions
a) Present the
b) Prepare the journal entries that Wilson Ltd. would record in the first year assuming that this is a finance lease. Round to the nearest dollar. (January 2, 2023 through to January 2, 2024)
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