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Lease Classification, Considering Firm Guidance (Issues Memo) Facts: On 1/1/20X1, Investor, Inc. ("Lessee") signed a Lease...
Lease Classification, Considering Firm Guidance (Issues Memo)
Facts: On 1/1/20X1, Investor, Inc. ("Lessee") signed a Lease Agreement with Developer Inc. ("Landlord") to lease Landlord's newly constructed hotel located at 15 Main St. in San Francisco, CA. The lease term is 20 years, and the estimated life of the building is 40 years. Lessee will occupy all 4 floors of the building. The lease includes renewal options, exercisable at the Landlord's option, to extend the contract term for three additional five-year terms. No purchase option is present in the contract. Lessee's monthly rental payments are $40,000 per month, plus a monthly supplemental rental cost based on Lessee's sales (1% of sales). From experience, Lessee estimates that 1% of its sales should approximate an additional $10,000 per month. As of 1/1/20X1, the appraised value of the building is $15 million. For simplicity, please ignore discounting in this example (use of present value calculations, rates implicit in the lease, etc.). There are no residual value guarantees present.
Assume that this arrangement is within the scope of lease accounting guidance. As needed to clarify areas of judgment, support your response with guidance from both the Codification and from EY's most recent Lease accounting guide book.
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ekkarill92 answered 6 months agoRelated Solutions
Journal Entries for a Capital Lease-Lessee On January 1, the lessee company signed an operating lease...
Journal Entries for a
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Assume that the lease
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than the 10-year lease term.
1. Make the journal
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Part 3: Lessee Entries: Capital Lease
On January 1, 2018, Southern, Inc. signed a 10-year
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The machine reverts back to the lessor at the end of the lease
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Part 3: Lessee Entries: Capital Lease On January 1, 2018, Southern, Inc. signed a 10-year non-cancelable...
Part 3: Lessee Entries: Capital Lease
On January 1, 2018, Southern, Inc. signed a 10-year
non-cancelable lease for a machine. The terms of the lease called
for Southern to make annual payments of $17,240 at the beginning of
each year, starting January 1, 2018. The machine has an estimated
useful life of 12 years.
The machine reverts back to the lessor at the end of the lease
term. Southern uses the straight-line method of depreciation for
all of its plant...
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Southern, Inc. signed a 10-year non-cancelable lease for a machine.
The terms of the lease called for Southern to make annual payments
of $17,336 at the beginning of each year, starting January 1, 2015.
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reverts back to the lessor at the end of the lease term. Southern
uses the straight-line method of depreciation for all of its plant...
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On January 1, 20X1, Investor Inc. purchased 25% of the common shares of Associate Ltd. for $50,000
ICP 2
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The following information...
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