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, 2016 to June 30, 2023, and the trucks must be returned to the lessor at the end of this period.

Instructions
(a) Using Excel, a financial calculator, or PV tables, prove the 8% implicit rate used in the lease.
(b) Prepare the journal entries and any year-end (December 31) adjusting journal entries made by Wagner Inc. in 2016 and 2017 assuming no reversing entries are used. Wagner uses the straight-line method of depreciation.
(c) Prepare a partial comparative statement of cash flows using the direct method for the 2016 and 2017 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.

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Annual Lease Payments WAGNER INC. Lease Amortization Schedule Interest (8%) on Unpaid Obligation Reduction of Lease Obligation Balance of Lease Obligation $3,064,470 2,519,470 2,176,028 1,805,110 Date July 1, 2016 July 1, 2017 July 1, 2018 $545,000 545,000 545,000 $201,558 174,082 $545,000 343.442 370,918