On January 1, 2011, Secada Co. leased a building to Ryker Inc. The relevant information related to
Question:
On January 1, 2011, Secada Co. leased a building to Ryker Inc. The relevant information related to the lease is as follows.
1. The lease arrangement is for 10 years.
2. The leased building cost $3,600,000 and was purchased for cash on January 1, 2011.
3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value.
4. Lease payments are $220,000 per year and are made at the end of the year.
5. Property tax expense of $85,000 and insurance expense of $10,000 on the building were incurred by Secada in the first year. Payment on these two items was made at the end of the year.
6. Both the lessor and the lessee are on a calendar-year basis.
(a) Prepare the journal entries that Secada Co. should make in 2011.
(b) Prepare the journal entries that Ryker Inc. should make in 2011.
(c) If Secada paid $30,000 to a real estate broker on January 1, 2011, as a fee for finding the lessee, how much should be reported as an expense for this item in 2011 by Secada Co.?
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Broker
A broker is someone or something that acts as an intermediary third party, managing transactions between two other entities. A broker is a person or company authorized to buy and sell stocks or other investments. They are the ones responsible for...
Step by Step Answer:
a Entries for Secada are as follows 1111 Building C...View the full answer
Intermediate Accounting
ISBN: 978-0470423684
13th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
