Question 3 (12 marks) REQUIRED: a) Prepare a lease amortization schedule for the term of this lease for the lessee. Creations Corporation signs an agreement on May 1, 2020 to lease equipment to Paver Corporation. Both Creations Corporation and Paver Corporation are private companies and both companies have elected to follow Accounting Standards for Private Enterprise (ASPE). The following information relates to the agreement: - The term of the lease is four years, with no renewal option. The equipment has an estimated economic life of six years. - The asset's fair value at May 1, 2020 is $385,000. - The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $25,000, which is guaranteed. - The agreement requires equal annual rental payments of $104,009.83 to Creations, the lessor, beginning May 1, 2020. - The lessee's borrowing rate is 11%. The lessor's implicit rate of 9% and is known to the lessee. b) For the lessee, Paver Corporation, prepare journal entries to record: - The lease contract, May 1, 2020. - The first payment received, May 1, 2020 The adjusting entries for the fiscal year-end December 31, 2020. c) For the lessor, Creations Corporation, prepare journal entries to record: - The lease contract, May 1, 2020 - The first payment received, May 1, 2020 The adjusting entry for the fiscal year-end which is December 31, 2020 Answer for a) Answer for b) & c) Date Account Titles Debit Credit