On January 1, 2025, Ivanhoe, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Flint Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. (a) The agreement requires equal rental payments at the beginning each year. (b) The fair value of the building on January 1, 2025 is $5500000; however, the book value to Holt is $4450000. (c) The building has an estimated economic life of 10 years, with no residual value. Ivanhoe depreciates similar buildings using the straight-line method. (d) At the termination of the lease, the title to the building will be transferred to the lessee. (e) Ivanhoe's incremental borrowing rate is 10% per year. Flint Warehouse Co. set the annual rental to ensure a 8% rate of return. The implicit rate of the lessor is known by Ivanhoe, Inc. (f) In addition to the payments for the use of the leased asset, the lessor also requires the lessee to pay a yearly payment of $14000 of executory costs related to taxes on the property. Click here to view factor tables. Ivanhoe, would record amortization expense on this asset in 2025 of (Round factor value calculation to 5 decimal places, e.g. 1.25124.) O $841796. O $560145. ○ $0. O $445000.
On January 1, 2025, Ivanhoe, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Flint Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following information pertains to this lease agreement. (a) The agreement requires equal rental payments at the beginning each year. (b) The fair value of the building on January 1, 2025 is $5500000; however, the book value to Holt is $4450000. (c) The building has an estimated economic life of 10 years, with no residual value. Ivanhoe depreciates similar buildings using the straight-line method. (d) At the termination of the lease, the title to the building will be transferred to the lessee. (e) Ivanhoe's incremental borrowing rate is 10% per year. Flint Warehouse Co. set the annual rental to ensure a 8% rate of return. The implicit rate of the lessor is known by Ivanhoe, Inc. (f) In addition to the payments for the use of the leased asset, the lessor also requires the lessee to pay a yearly payment of $14000 of executory costs related to taxes on the property. Click here to view factor tables. Ivanhoe, would record amortization expense on this asset in 2025 of (Round factor value calculation to 5 decimal places, e.g. 1.25124.) O $841796. O $560145. ○ $0. O $445000.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 1E: Determining Type of Lease and Subsequent Accounting On January 1, 2019, Caswell Company signs a...
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Transcribed Image Text:On January 1, 2025, Ivanhoe, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Flint Warehouse
Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet
to be incurred by the lessor. The following information pertains to this lease agreement.
(a) The agreement requires equal rental payments at the beginning each year.
(b) The fair value of the building on January 1, 2025 is $5500000; however, the book value to Holt is $4450000.
(c) The building has an estimated economic life of 10 years, with no residual value. Ivanhoe depreciates similar buildings using the
straight-line method.
(d) At the termination of the lease, the title to the building will be transferred to the lessee.
(e) Ivanhoe's incremental borrowing rate is 10% per year. Flint Warehouse Co. set the annual rental to ensure a 8% rate of return. The
implicit rate of the lessor is known by Ivanhoe, Inc.
(f) In addition to the payments for the use of the leased asset, the lessor also requires the lessee to pay a yearly payment of $14000 of
executory costs related to taxes on the property.
Click here to view factor tables.
Ivanhoe, would record amortization expense on this asset in 2025 of (Round factor value calculation to 5 decimal places, e.g. 1.25124.)
O $841796.
O $560145.
○ $0.
O $445000.
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