On January 1, 2017, Malaki Corp., which uses IFRS 16, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.

1. The agreement requires equal rental payments of $73,580 beginning on January 1, 2017.

2. The lathe's fair value on January 1, 2017 is $450,000.

3. The lathe has an estimated economic life of 12 years, with an unguaranteed residual value of $12,000. Maleki Corp. depreciates similar equipment using the straight-line method. Estimated economic life of 12 years, with an unguaranteed residual value of $12,000. Maleki Corp.

4. The lease is non-renewable. At the termination of the lease, the lathe reverts to the lessor.

5. Maleki's incremental borrowing rate is 12% per year. The lessor's implicit rate is not known by Maleki Corp.

6. The yearly rental payment includes $2,470.29 of executory costs related to insurance on the loom.

Instructions:

a) Using a financial calculator or Excel functions, calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement.

b) Prepare an amortization schedule for the term of the lease to be used by Maleki. Use Excel.

c) Prepare the journal entries on Maleki Corp.'s books to record the payments and expenses related to this lease for the years 2017 and 2018 as well as any adjusting journal entries at its fiscal year ends of December 31, 2017 and 2018. Maleki does not use reversing entries.

d) Prepare Maleki Corp.'s required note disclosure on the lease for the fiscal year ending December 31, 2018.