Solution-Calculate the amount of the right-of-use asset

Calculate the amount of the right-of-use asset

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Reference no: EM132817827

On January 1, 2020, Brampton Corp., which uses IFRS 16, signs a 10-year, non-cancellable lease agreement to lease a specialty machine from Ajax Inc. The following information concerns the lease agreement.

1. The agreement requires equal rental payments of $73,580 beginning on January 1, 2017.

2. The machine's fair value on January 1, 2020 is $450,000.

3. The machine has an estimated economic life of 12 years, with an unguaranteed residual value of $12,000. Brampton Corp. depreciates similar equipment using the straight-line method.

4. The lease is non-renewable. At the termination of the lease, the machine reverts to the lessor.

5. Brampton's incremental borrowing rate is 12% per year. The lessor's implicit rate is not known by Brampton Corp.

6. The yearly rental payment includes $2,470.29 of executory costs related to insurance on the machine.

Problem (a) Calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement.

Problem (b) amortization schedule for the term of the lease to be used by Brampton.

Problem (c) Prepare the journal entries on Brampton Corp.'s books to record the payments and expenses related to this lease for the years 2020 and 2021

Reference no: EM132817827

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Calculate the amount of the right-of-use asset

Reference no: EM132817827

Reference no: EM132817827

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