Flounder Corp., which uses IFRS, signs non-renewable, non-cancellable lease agreement to lease robotic equipment from Xiu Inc.

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Question:

Flounder Corp., which uses IFRS, signs non-renewable, non-cancellable lease agreement to lease robotic equipment from Xiu Inc. The following information concerns the lease agreement.

Inception date		January 1, 2020
Lease term		5 years
Fair value of equipment Jan. 1, 2020		$130,000
Economic life of leased equipment		7 years
Annual rental payments starting Jan. 1, 2020		$23,694
Option to purchase at the end of the term		none
Depreciation method		Straight-line
Residual value		none
Flounder’s incremental borrowing rate		10%

Part 1

Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

The amount of the right-of-use asset

Prepare the initial entry to reflect the signing of the lease agreement. (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 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 1, 2020

Part 2

Prepare an amortization schedule for the term of the lease to be used by Flounder. Use Excel. (Round answers to 0 decimal places, e.g. 5,275.)

Flounder Corp. Lease Amortization Schedule (Lessee)
Date	Annual Payment	Interest on Unpaid Liability	Reduction of Lease Liability	Balance of Lease Liability
				$
January 1, 2020	$		$
January 1, 2021		$
January 1, 2022
January 1, 2023
January 1, 2024

Part 3

Prepare the journal entries on Flounder Corp.’s books to record the payments related to this lease for the years 2020 and 2021 as well as any adjusting journal entries at its fiscal year ends of December 31, 2020, and 2021. (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 0 for the amounts.)