On July 1, 2017, Joseph leased his vacant lot for a period to Ivan. The...
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Accounting
On July 1, 2017, Joseph leased his vacant lot for a period to Ivan. The lease will expire on December 31, 2029 at an annual rate of 2,400,000. Ivan agreed to pay the following on July 1, 2017:
- 1,200,000 representing rental payment for 2017
- 2,400,000 representing rental payment for 2018
- The succeeding annual rent will be paid starting 2019
- Security deposit of 2,400,000
Ivan also agreed to pay the annual property tax of 30,000 starting 2017.
The lease contract provides, among others that the lessee will construct a 5-storey building for parking purposes at a cost of 36,000,000. Ownership of the building shall belong to the lessor upon the expiration or termination of the lease contract.
Determine the total gross income to be reported by Joseph in 2019 using 1.) spread out method, 2.) lump sum method
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