Question
On January 1, 2018, Green Co. recorded our right-of-use assets of $270,360 in an operating lease. The lease calls for ten annual payments are $40,000
On January 1, 2018, Green Co. recorded our right-of-use assets of $270,360 in an operating lease. The lease calls for ten annual payments are $40,000 at the beginning of each year. The interest rate charged by the lessor was 10%. 20. What amount will Green Co. record for interest expense at December 31, 2018? A. $23,036. B. $27,036. C. $31,036. D. $40,000. 21. What amount will Green Co. record for amortization expense at December 31, 2018? A. $23,036. B. $27,036. C. $16,964. D. $63,036. 22. On January 1st, McBK Stores leased retail space for a five-year period. Base monthly lease payments are $2,000 due at the beginning of each month, calculated by the lessor using a 5% discount rate. The lease agreement includes a 10% percentage-of-sales provision in addition to the base lease payment. McBK estimates a 60% probability of selling at least $10,000 annually that would be subject to additional lease payments. What amount if any should be added to the right-of-use asset and lease payable under this rental agreement? A. An additional $5,000 should be added. B. An additional $3,000 should be added. C. An additional $12,000 should be added. D. No additional amount should be added.
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