Question
Exercise 21A-17 a-c On January 1, 2017, Windsor Co. leased a building to Wildhorse Inc. The relevant information related to the lease is as follows.
Exercise 21A-17 a-c On January 1, 2017, Windsor Co. leased a building to Wildhorse Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,100,000 (unguaranteed). 2. The leased building has a cost of $3,600,000 and was purchased for cash on January 1, 2017. 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 $250,000 per year and are made at the beginning of the year. 5. Wildhorse has an incremental borrowing rate of 9%, and the rate implicit in the lease is unknown to Wildhorse. 6. Both the lessor and the lessee are on a calendar-year basis.
a. Prepare the journal entries that Windsor should make in 2017.
b. Prepare the journal entries that Wildhorse should make in 2017.
c. If Wildhorse paid $25,000 to a real estate broker on January 1, 2017, as a fee for finding the lessor, what is the initial measurement of the right-of-use asset?
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