Wagner Inc. is a large Canadian public company that uses IFRS. A lease for a fleet of
Question:
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, 2013, to June 30, 2020, and the trucks must be returned to the lessor at the end of this period.
Instructions
(a) Prepare the journal entries and any year-end (December 31) adjusting journal entries made by Wagner Inc. in 2013 and 2014.
(b) Prepare a partial comparative statement of cash flows for the 2013 and 2014 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 statement of cash flows seems to present a more favourable picture of Wagner Inc.'s financial performance? Comment briefly.
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1118300855
10th Canadian Edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy