Question

In: Accounting

On January 1, 2017, Marin Co. leased a building to Cullumber Inc. The relevant information related...

On January 1, 2017, Marin Co. leased a building to Cullumber Inc. The relevant information related to the lease is as follows.

1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $2,700,000 (unguaranteed).
2. The leased building has a cost of $3,200,000 and was purchased for cash on January 1, 2017.
3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value.
4. Lease payments are $275,000 per year and are made at the beginning of the year.
5. Cullumber has an incremental borrowing rate of 9%, and the rate implicit in the lease is unknown to Cullumber.
6. Both the lessor and the lessee are on a calendar-year basis.

If Cullumber paid $20,000 to a real estate broker on January 1, 2017, as a fee for finding the lessor, what is the initial measurement of the right-of-use asset?

Right-of-use asset =

Solutions

Expert Solution


Related Solutions

n January 1, 2017, Nelson Co. leased a building to Wise Inc. The relevant information related...
n January 1, 2017, Nelson Co. leased a building to Wise Inc. The relevant information related to the lease is as follows. 1.The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,500,000 (unguaranteed). 2.The leased building has a cost of $4,000,000 and was purchased for cash on January 1, 2017. 3.The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with...
Exercise 21-17 (Part Level Submission) On January 1, 2020, Marin Co. leased a building to Cullumber...
Exercise 21-17 (Part Level Submission) On January 1, 2020, Marin Co. leased a building to Cullumber Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $2,900,000 (unguaranteed). 2. The leased building has a cost of $3,400,000 and was purchased for cash on January 1, 2020. 3. The building is depreciated on a straight-line basis....
2. On January 1, 2020, Firm Lessor leased a building to Firm Lessee. The relevant information...
2. On January 1, 2020, Firm Lessor leased a building to Firm Lessee. The relevant information related to the lease is as follows. 1) The lease arrangement is for 2 years. 2) Equal rental payments are due on January 1 of each year, beginning in 2020. 3) The building’s fair value at commencement of the lease is $100,000. The building is depreciated on a straight-line basis. Its estimated economic life is 4 years with salvage value of $25,000 at the...
Right- to- Debbink Co. leased machinery from Young, Inc. on January 1, 2017. The lease term...
Right- to- Debbink Co. leased machinery from Young, Inc. on January 1, 2017. The lease term was for 8 years, with equal annual rental payments of $5,300 at the beginning of each year. In addition, the lease provides an option to purchase the machinery at the end of the lease term for $2,000, which Debbink is reasonably certain it will exercise as it believes the fair value of the machinery will be at least $6,000. The machinery has a useful...
On January 1, 2020, Firm ABC (lessor) leased a building to Firm XYZ (lessee). The relevant...
On January 1, 2020, Firm ABC (lessor) leased a building to Firm XYZ (lessee). The relevant information related to the lease is as follows. 1) The lease arrangement is for 3 years. 2) The building’s cost and fair value at commencement of the lease is $60,000. The building is depreciated on a straight-line basis. Its estimated economic life is 5 years with salvage value of $12,000 at the end of the lease. The residual value after 5 years is assumed...
On January 1 year 1, superstar company leased a building to pzed  Inc. The lease arrangement is...
On January 1 year 1, superstar company leased a building to pzed  Inc. The lease arrangement is for 20 years. The building is expected to have no residual value at the end of the lease. The leased building has a cost of $21,000,000 and was purchased for cash on January 1, year 1. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. Lease payments are $1,778,000 per year and are made...
On January 1, 2017, Cullumber Inc. agrees to buy 3 kilos of gold at $39,000 per...
On January 1, 2017, Cullumber Inc. agrees to buy 3 kilos of gold at $39,000 per kilo from Golden Corp on April 1, 2017, but does not intend to take delivery of the gold. On the day that the contract was entered into, the fair value of this forward contract was zero. The fair value of the forward subsequently fluctuated as follows: Date Fair Value of Forward Contract January 20, 2017 $546 February 6, 2017 $124 February 28, 2017 $362...
Cullumber Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The...
Cullumber Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2020. The lease is for an 8-year period and requires equal annual payments of $30,840 at the beginning of each year. The first payment is received on January 1, 2020. Cullumber had purchased the machine during 2016 for $103,000. Collectibility of lease payments by Cullumber is probable. Cullumber set the annual rental to ensure a 6% rate of return. The machine has an economic life of...
On January 1, 2021, Kiki Co. leased machinery from Jiji Co. Presented below is selected information...
On January 1, 2021, Kiki Co. leased machinery from Jiji Co. Presented below is selected information about the non-cancelable lease agreement, the leased equipment, and the parties to the lease. • Kiki borrows at 5% and is unable to determine that Jiji’s implicit rate is 4%. • Jiji paid $90,000 for the machine and at the inception of the lease, its fair value is $120,000. • The machine has a $7,000 residual value, none of which is guaranteed, and an...
On January 1, 2017, Tamarisk Company leased equipment to Vaughn Corporation. The following information pertains to...
On January 1, 2017, Tamarisk Company leased equipment to Vaughn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination of the lease. 2. Equal rental payments are due on January 1 of each year, beginning in 2017. 3. The fair value of the equipment on January 1, 2017, is $184,000, and its cost is $147,200. 4. The equipment...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT