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Question # 3 Consideration On January 1 , 2 0 1 7 , Hogwarts Co . entered into a seven year lease for a Hungarian
Question # Consideration
On January Hogwarts Co entered into a seven year lease for a Hungarian Horntail dragon from Charlie Weasley Inc. for use in TriWizard Tournaments. The lease requires:
a Annual yearend payments of $ for the dragon, $ for caretaker services, and $ to cover Weasley's annual liability insurance on the dragon.
b Hogwarts to make a payment of $ times the Libor rate at the end each year. The Libor rate is at the beginning of the lease and at the end of the first year.
c Hogwarts's to make a payment of of the year's TriWizard Tournament ticket sales, payable at the end of the year. Hogwarts expects total first year sales to be $ at the beginning of the lease, but actually has $ in sales the first year.
Hogwarts has a incremental borrowing rate and does not know the rate implicit in the lease. Hogwarts estimates the annual standalone value of similar dragon leases to be $ and the annual standalone value of similar upkeep contracts to be $ The fair value of the Horntail is $ and its useful life is years.
What are the components in the lease contract? point
Determine the initial lease liability the lessee Hogwarts will put on its books. points
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