Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Gage Co. purchases land and constructs a service station and car wash for a total of $540,000. At January 2, 2021, when construction is completed,
- Gage Co. purchases land and constructs a service station and car wash for a total of $540,000. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $600,000 and immediately leased from the oil company by Gage. Fair value of the land at time of the sale was $60,000. The lease is a 10-year, noncancelable lease. Gage uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Gage at termination of the lease. A partial amortization schedule for this lease is as follows:
Payments Interest Amortization Balance
Jan. 2, 2021 $600,000.00
Dec. 31, 2021 $97,646.71 $60,000.00 $37,646.71 562,353.29
Dec. 31, 2022 97,646.71 56,235.33 41,411.38 520,941.91
Dec. 31, 2023 97,646.71 52,094.19 45,552.52 475,389.39
The total lease-related income recognized by the lessee during 2022 is which of the following?
| $ -0- | |
| $4,000 | |
| $6,000 | |
| $60,000 |
Please explain in detail! Thank you. The answer I chose was 4,000 BUT it was wrong!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started