On 18 December 20X1, Kushner Construction Ltd. leased a crane from Schultz Equipment Inc. for use in
Question:
On 18 December 20X1, Kushner Construction Ltd. leased a crane from Schultz Equipment Inc. for use in a building project. The lease is for three years. The lease commences on 1 January 20X2.
Annual lease payments are $150,000, payable at the beginning of each year. In addition, Kushner must pay $45,000 for delivery and set-up of the crane and another $45,000 at the end of the lease term for deconstruction and removal of the crane. The lease is not renewable. Schultz will lease the crane to other construction companies after Kushner’s project is finished. The crane has a fair value of $700,000 and a useful life of ten years. Kushner’s incremental borrowing rate is 8%.
Required:
Calculate the amount that would be recorded as a right-of-use asset on 1 January 20X2 and prepare the journal entry.
Prepare the lease liability amortization table for this lease.
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel