B Inc. leased production machinery to MT Automotive on October 1, 2019. The terms of the lease are as follows: Lease term (fixed and non-cancellable) 8 years Estimated economic life of the machinery 12 years Fair market value of the machinery at lease commencement $250,000 Bargain purchase option None Transfer of title None Guaranteed residual value, end of lease $25,000 Non-lease costs included in fixed payments (maintenance agreement) $2,000 Annual fixed payments, due beginning of lease year $33,500 MT Automotive accounts for lease and non-lease costs separately. Other information pertaining to the lessee follows: Expected payout on guaranteed residual $25,000 Lessee's depreciation method Declining balance, 50% Lessee's incremental borrowing rate 6% Lessee's year end is September 30 Implicit rate in lease Not readily determinable Required: 

a) Calculate the amount that MT Automotive must initially recognize as a right-of-use (ROU) asset under this contract, using a financial calculator. 

b) compute an asset depreciation schedule using Excel that covers the useful life of the equipment. Confirm the initial measurement of the ROU asset using the Excel PV function.

c) Calculate a lease liability amortization schedule for the life of the lease using Excel. 

d) Prepare all journal entries for MT Automotive related

Answer rating: 100% (QA)

a To calculate the amount that MT Automotive must initially recognize as a rightofuse ROU asset under this contract we need to calculate the present v... View the full answer