Gage Co. purchases land and builds a service station and car wash for a total of $360,000.
Question:
Gage Co. purchases land and builds a service station and car wash for a total of $360,000. On January 2, 2014, when construction is complete, the facility and the land on which it was built are sold to a major oil company for $400,000 and immediately leased to the oil company by Gage. The fair value of the land at the time of sale was $40,000. The lease is a 10-year, non-cancellable lease. Gage uses straight-line depreciation for its other business interests. The economic life of the facility is 15 years with zero residual value. Title to the facility and land will pass to Gage at the end of the lease. A partial amortization schedule for this lease is as follows:
dates | Paid | Interest | Amortization | Balance |
January 2, 2014 | 400,000.00 | |||
December 31, 2014 | 65.098,13 | 40,000.00 | 25.098,13 | 374.901,87 |
December 31, 2015 | 65.098,13 | 37.490,19 | 27.607,94 | 347.293,93 |
December 31, 2016 | 65.098,13 | 34.729,39 | 30.368,74 | 316.925,19 |
What is the amount of the lessee's obligation to the lessor after the December 31, 2016 payment?
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso