Wagner Inc. is a large Canadian public company that uses IFRS. A lease for a fleet of trucks has been capitalized and the lease amortization schedule for the first three lease payments appears below. The trucks have an economic life of eight years. The lease term is from July 1, 2011, to June 30, 2018, and the trucks must be returned to the lessor at the end of this period of time.

Instructions
(a) Prepare the journal entries and any year-end (December 31) adjusting journal entries made by Wagner Inc. in 2011 and 2012.
(b) Prepare a partial comparative statement of cash flows for the 2011 and 2012 fiscal years along with any additional disclosure notes. Wagner Inc. has adopted the policy of classifying any interest paid as operating activities on the statement of cash flows.
(c) Repeat parts (a) and (b) assuming that the lease must be recorded as an operating lease.
(d) From the perspective of an external user, which cash flow statement seems to present a more favourable picture of Wagner Inc.€™s financial performance? Comment briefly.

Transcribed Image Text:

WAGNER INC. Lease Amortization Schedule Annual Lease Payments Interest(8%) on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligation $3,064,470 2,519,470 2,176,028 1,805,110 Date July 1, 2011 July 1, 2012 July 1, 201:3 $545,000 545,000 545,000 $201,558 174,082 $545,000 343,442 370,918