On January 1, 2025, Wildhorse, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from PinaWarehouse Company. Collectibility of the lease payments is reasonably predictable and no important uncertaintiessurround the costs yet to be incurred by the lessor. The following information pertains to this lease agreement:(a) The agreement requires equal rental payments at the beginning of each year.(b) The fair value of the building on January 1, 2025 is $5850000; however, the book value to Pina is $4800000.(c) The building has an estimated economic life of 10 years, with no residual value. Wildhorse depreciates similarbuildings using the straight-line method.(d) At the termination of the lease, the title to the building will be transferred to the lessee.(e) Wildhorse's incremental borrowing rate is 12% per year. Pina Warehouse Co. set the annual rental to ensure a 10%rate of return. The implicit rate of the lessor is known by Wildhorse, Inc.(f) In addition to the payments for the use of the leased asset, the lessor also requires the lessee to pay a yearly paymentof $14700 of executory costs related to taxes on the property..Click here to view factor tables.From the lessee's viewpoint, what will be recorded as Right-of-Use Asset amount? (Round factor value calculation to 5decimal places, e.g. 1.25124. and round intermediate calculation to O decimal places.)$5405496$5850000$4800000$5949357

An agreement of contract that is prepared to transfer the right to use the resources for a…

On January 1, 2025, Wildhorse, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Pina Warehouse Company. Collectibility of the lease payments is reasonably predictable and no important uncertainties surround the costs yet to be incurred by the lessor. The following information pertains to this lease agreement: (a) The agreement requires equal rental payments at the beginning of each year. (b) The fair value of the building on January 1, 2025 is $5850000; however, the book value to Pina is $4800000. (c) The building has an estimated economic life of 10 years, with no residual value. Wildhorse depreciates similar buildings using the straight-line method.

On January 1, 2025, Wildhorse, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Pina Warehouse Company. Collectibility of the lease payments is reasonably predictable and no important uncertainties surround the costs yet to be incurred by the lessor. The following information pertains to this lease agreement: (a) The agreement requires equal rental payments at the beginning of each year. (b) The fair value of the building on January 1, 2025 is $5850000; however, the book value to Pina is $4800000. (c) The building has an estimated economic life of 10 years, with no residual value. Wildhorse depreciates similar buildings using the straight-line method.

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 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...

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Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a 10-year cancelable (at the option of either party) agreement to lease a storage building from Wake Company. The following information pertains to this lease agreement: 1. The agreement requires rental payments of 100,000 at the beginning of each year. 2. The cost and fair value of the building on January 1, 2019, is 2 million. The storage building has not been specialized for Caswell. 3. The building has an estimated economic life of 50 years, with no residual value. Caswell depreciates similar buildings according to the straight-line method. 4. The lease does not contain a renewable option clause. At the termination of the lease, the building reverts to the lessor. 5. Caswells incremental borrowing rate is 14% per year. Wake set the annual rental to ensure a 16% rate of return (the loss in service value anticipated for the term of the lease). Caswell knows the implicit interest rate. 6. Executory costs of 7,000 annually, related to taxes on the property, are paid by Caswell directly to the taxing authority on Dec. 31 of each year. Required: 1. Determine what type of lease this is for the lessee. 2. Prepare appropriate journal entries on the lessees books to reflect the signing of the lease agreement and to record the payments and expenses related to this lease for the years 2019 and 2020.
On January 1, 2025, Wildhorse, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Ayayai Warehouse Company, Collectibility of the lease payments is reasonably predictable and no important uncertainties surround the costs yet to be incurred by the lessor. The following information pertains to this lease agreement: (a) The agreement requires equal rental payments at the beginning of each year. (b) The fair value of the building on January 1, 2025 is $6450000; however, the book value to Ayayai is $5400000. (c) The building has an estimated economic life of 10 years, with no residual value. Wildhorse depreciates similar buildings using the straight-line method. (d) At the termination of the lease, the title to the building will be transferred to the lessee. (e) Wildhorse's incremental borrowing rate is 10% per year. Ayayai Warehouse Co. set the annual rental to ensure a 8% rate of return. The implicit rate of the lessor is known by Wildhorse, Inc. (f) In…
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