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.
Instructions
Answer the following, rounding all numbers to the nearest cent.
a. Calculate the amount of the right-of-use asset and lease liability. Show calculations using any of the following methods: (1) factor tables, (2) a financial calculator, or (3) Excel functions.
b. Discuss the nature of this lease to Russell Corporation, the lessee.
c. Discuss the nature of this lease to Hebert Corporation, the lessor.
d. Prepare a lease amortization schedule for the lease obligation using a computer spreadsheet for Russell Corporation for the five-year lease term.
e. Prepare the journal entries on the lessee’s books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2020 and 2021. Russell’s annual accounting period ends on December 31, and Russell does not use reversing entries.
