On January 1, 2020, Peace Hall Company signs a 10-year noncancelable lease agreement to lease a...
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On January 1, 2020, Peace Hall Company signs a 10-year noncancelable lease agreement to lease a building from ASU Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of 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 each year. (b) Fair value of building is $6,000,000. Book value to ASU is $4,950,000. (c) Building has an estimated economic life of 10 years, with no residual value. ASU uses the straight-line method. (d) At the termination of the lease, the title will be transferred to the lessee. (e) Peace Hall incremental borrowing rate is 11%. ASU set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known to Peace Hall. Question 39 (4 points) Listen From the lessor's viewpoint, what type of lease is this? Direct-financing lease. Sales-type lease. Operating lease. Finance lease. On January 1, 2020, Peace Hall Company signs a 10-year noncancelable lease agreement to lease a building from ASU Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of 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 each year. (b) Fair value of building is $6,000,000. Book value to ASU is $4,950,000. (c) Building has an estimated economic life of 10 years, with no residual value. ASU uses the straight-line method. (d) At the termination of the lease, the title will be transferred to the lessee. (e) Peace Hall incremental borrowing rate is 11%. ASU set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known to Peace Hall. Question 39 (4 points) Listen From the lessor's viewpoint, what type of lease is this? Direct-financing lease. Sales-type lease. Operating lease. Finance lease.
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It is a finance lease a is The Useful life of lease tenue is a... View the full answer
Related Book For
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
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