Lofty Company is a maker of electric cars. On Jan. 1, 2018, the company signed a...

  

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Lofty Company is a maker of electric cars. On Jan. 1, 2018, the company signed a contract to lease battery making equipment from Leafy Company. The lease was for 6 years, commencing immediately on January 1, 2018. The annual lease payment was $46,000, and to be made at the beginning of each year. Under the agreement, Lofty (lessee) had the option of purchasing the leased equipment at the price of $12,000 at the end of the lease when the equipment is expected to be worth $18,000. Lofty expects the equipment to have a useful life of 8 years and a residual value of $8,000. Leafy's (lessor) rate of return on the leasing arrangement was 7%, and this was known to Lofty the lessee. Lofty Company had a Dec. 31 year end and followed IFRS. Required: (1) Prepare an amortization table for Lofty for the lease (must show work using present values from the attached tables.) (2) Prepare all journal entries for Lofty the lessee in 2018 and 2019 (3) Prepare the journal entries Lofty the lessee would make when exercising the option of purchasing the equipment at the end of the lease. Lofty Company is a maker of electric cars. On Jan. 1, 2018, the company signed a contract to lease battery making equipment from Leafy Company. The lease was for 6 years, commencing immediately on January 1, 2018. The annual lease payment was $46,000, and to be made at the beginning of each year. Under the agreement, Lofty (lessee) had the option of purchasing the leased equipment at the price of $12,000 at the end of the lease when the equipment is expected to be worth $18,000. Lofty expects the equipment to have a useful life of 8 years and a residual value of $8,000. Leafy's (lessor) rate of return on the leasing arrangement was 7%, and this was known to Lofty the lessee. Lofty Company had a Dec. 31 year end and followed IFRS. Required: (1) Prepare an amortization table for Lofty for the lease (must show work using present values from the attached tables.) (2) Prepare all journal entries for Lofty the lessee in 2018 and 2019 (3) Prepare the journal entries Lofty the lessee would make when exercising the option of purchasing the equipment at the end of the lease.