At the beginning of current year, an entity leased an equipment from a lessor with the following pertinent information: Annual rental payable at the end of each year 1,000,000 Initial direct cost paid 400,000 Lease bonus paid to lessor before commencement of the lease 300,000 Lease incentive received 100.000 Discounted amount of restoring building as required by contract 700,000 Leasehold improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of equipment 8 years Implicit interest rate 10% PV of an ordinary annuity of 1 for 5 periods at 10% 3.79 Pres
At the beginning of current year, an entity leased an equipment from a lessor with the following pertinent information: Annual rental payable at the end of each year 1,000,000 Initial direct cost paid 400,000 Lease bonus paid to lessor before commencement of the lease 300,000 Lease incentive received 100.000 Discounted amount of restoring building as required by contract 700,000 Leasehold improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of equipment 8 years Implicit interest rate 10% PV of an ordinary annuity of 1 for 5 periods at 10% 3.79 Pres
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 6E: Lessor Accounting Issues Ramsey Company leases heavy equipment to Terrell Inc. on March 1, 2019, on...
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At the beginning of current year, an entity leased an equipment from a lessor with the following pertinent information:
Annual rental payable at the end of each year 1,000,000
Initial direct cost paid 400,000
Lease bonus paid to lessor before commencement of the lease 300,000
Lease incentive received 100.000
Discounted amount of restoring building as required by contract 700,000
Leasehold improvement 200,000
Purchase option that is reasonably certain to be exercised 500,000
Lease term 5 years
Useful life of equipment 8 years
Implicit interest rate 10%
PV of an ordinary annuity of 1 for 5 periods at 10% 3.79
Present value of 1 for 5 periods at 10% 0.62
What is the initial lease liability?
What is the cost of the right of use asset?
What is the interest expense for the current year?
What is the lease liability at year-end?
What is the depreciation of the right of use asset for current year?
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