Solvent Inc. signs a 10-year lease for a building owned by Property Inc. that is appropriately...
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Solvent Inc. signs a 10-year lease for a building owned by Property Inc. that is appropriately classified as an operating lease by both the lessee and lessor. Lease payments are $165,000 per year. The building has an estimated useful life of 20 years with no salvage value. Assume that the building has a fair value of $1,000,000 at the commencement of the lease, and Property incurred maintenance costs of $10,000 during 2020. What amount would Property Inc. recognize in its income statement (ignoring taxes) for the year ended December 31, 2020? Assume that Property Inc. is using the straight-line method to depreciate buildings. A. Net income before taxes of $105,000 B. Net loss before taxes of $105,000 C. Net income before taxes $25,000 D. None of the above Solvent Inc. signs a 10-year lease for a building owned by Property Inc. that is appropriately classified as an operating lease by both the lessee and lessor. Lease payments are $165,000 per year. The building has an estimated useful life of 20 years with no salvage value. Assume that the building has a fair value of $1,000,000 at the commencement of the lease, and Property incurred maintenance costs of $10,000 during 2020. What amount would Property Inc. recognize in its income statement (ignoring taxes) for the year ended December 31, 2020? Assume that Property Inc. is using the straight-line method to depreciate buildings. A. Net income before taxes of $105,000 B. Net loss before taxes of $105,000 C. Net income before taxes $25,000 D. None of the above
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Answer is A Net Income before Taxes of 105000 Explaination Property Inc Working Notes ... View the full answer
Related Book For
Understanding financial statements
ISBN: 978-0136086246
9th Edition
Authors: Lyn M. Fraser, Aileen Ormiston
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