Question
On January 1 of Year 1, Merick Inc. purchased a building for $6 million. The building is expected to have a 45- year life with
On January 1 of Year 1, Merick Inc. purchased a building for $6 million. The building is expected to have a 45- year life with no salvage value. The building was leased immediately by Kregor Construction for $390,000 a year, payable January 1 of each year starting at the lease commencement. The lease term is five years with no renewal or purchase option reasonably expected to be exercised. There are no uncertainties surrounding the lease payments to be made by Kregor. The implicit rate of the lease is 7%, known by Kregor Construction. Required a. How would Kregor Construction classify the lease? Answer Lease Liability Schedule Right-of-Use Asset Schedule Journal Entries b. Prepare a schedule of the lease liability for the first two years of the lease term. Note: Round each amount in the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.
date | lease payment | interest on liability | lease liability change | lease liability |
---|---|---|---|---|
jan 1. yr1 | ||||
jan 1. yr1 | ||||
jan 1, yr2 | ||||
jan 1, yr3 |
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