Question

Kingbird Corp., which uses IFRS, signs non-renewable, non-cancellable lease agreement to lease robotic equipment from Xiu Inc. The following information concerns the lease agreement.

Inception date		January 1, 2020
Lease term		5 years
Fair value of equipment Jan. 1, 2020		$120,000
Economic life of leased equipment		7 years
Annual rental payments starting Jan. 1, 2020		$21,511
Option to purchase at the end of the term		none
Depreciation method		Straight-line
Residual value		none
Kingbird’s incremental borrowing rate		9%

Using (1) factor tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the right-of-use asset and lease liability. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.) The amount of the right-of-use asset $ Prepare the initial entry to reflect the signing of the lease agreement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 1, 2020

Prepare an amortization schedule for the term of the lease to be used by Kingbird. Use Excel. (Round answers to 0 decimal places, e.g. 5,275.) Kingbird Corp. Lease Amortization Schedule (Lessee) Date Annual Payment Interest on Unpaid Liability Reduction of Lease Liability Balance of Lease Liability $ January 1, 2020 $ $ January 1, 2021 $ January 1, 2022 January 1, 2023 January 1, 2024

Answer 1

Year	Annual payment	P.V of 9%	Present value
1.00	21,511	0.91743	19,735
2.00	21,511	0.84168	18,105
3.00	21,511	0.77218	16,610
4.00	21,511	0.70843	15,239
5.00	21,511	0.64993	13,981
			83,670

The amount of right to use asset 83,670

Initial Entry

Jan 1, 2020 Lease asset a/c dr 83,670

to Lease Liability a/c 83,670

(being asset taken on lease)

Kingbird Corp. Lease Amortization Schedule (Lessee)
Date	opening lease Liability (A)	Annual payment (B)	Interest on unpaid liability (C = A * 9%)	Reduction of unpaid liability	Balance of lease liability
1-Jan-20	83,670	21,511	7,530	13,981	69,689
1-Jan-21	69,689	21,511	6,272	15,239	54,450
1-Jan-22	54,450	21,511	4,901	16,610	37,840
1-Jan-23	37,840	21,511	3,406	18,105	19,734
1-Jan-24	19,734	21,511	1,776	19,735	(0)