A lease agreement between Hebert Corporation and Russell Corporation is described in E20.3.
Instructions
Provide the following for Hebert Corporation, the lessor, rounding all numbers to the nearest cent.
a. Discuss the nature of the lease.
b. Calculate the amount of gross investment at the inception of the lease.
c. Calculate the amount of net investment at the inception of the lease. Show calculations using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel functions.
d. Prepare a lease amortization schedule using a computer spreadsheet for Hebert Corporation for the fiveyear lease term.
e. Prepare the journal entries to reflect the signing of the lease and to record the receipts and income related to this lease for the years 2020, 2021, and 2022. The lessor’s accounting period ends on December 31, and Hebert Corporation does not use reversing entries.
Data From E20.3.
The following facts are for a non-cancellable lease agreement between Hebert Corporation and Russell Corporation, a lessee:
The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties about costs that have not yet been incurred by the lessor. The lessee assumes responsibility for all executory costs. Both Russell and Hebert use IFRS 16.
