Question
On February 20, 2017, Waterway Inc. purchased a machine for $1,402,800 for the purpose of leasing it. The machine is expected to have a 10-year
On February 20, 2017, Waterway Inc. purchased a machine for $1,402,800 for the purpose of leasing it. The machine is expected to have a 10-year life, no residual value, and will be depreciated on the straight-line basis. The machine was leased to Wildhorse Company on March 1, 2017, for a 4-year period at a monthly rental of $19,700. There is no provision for the renewal of the lease or purchase of the machine by the lessee at the expiration of the lease term. Waterway paid $31,680 of commissions associated with negotiating the lease in February 2017.
(a) What expense should Wildhorse Company record as a result of the facts above for the year ended December 31, 2017? Rent Expense 197000 (b) What income or loss before income taxes should Waterway record as a result of the facts above for the year ended December 31, 2017? (Hint: Amortize commissions over the life of the lease.) Income from lease before taxes 69703Step 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