On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at
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On the first day of its accounting year, January 1, 2020, Lessee Inc. leased a building at an annual payment of $208,272 to be paid at the beginning of each year for 10 years. The first payment was paid immediately. The building, which is new, cost $1,650,000 and has an estimated useful life of 12 years. The lessor’s implicit rate is 6% and is known to Lessee Inc. The residual value of the building of $45,000 was guaranteed by Lessee Inc. who expects the residual value to approximate $30,000. Lessee Inc. incurred the following additional costs and received the following incentives pertaining to this lease:
- Paid legal fees of $1,500 related to the execution of the lease.
- Paid a fixed lease payment of $208,272 plus a $5,250 recurring payment to the lessor for hazard insurance on the building.
- Received a lease incentive of $2,250 to sign the lease.
Related Book For
Accounting for Governmental and Nonprofit Entities
ISBN: 978-1259917059
18th edition
Authors: Jacqueline L. Reck, James E. Rooks, Suzanne Lowensohn, Daniel Neely
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