Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. question 1 on january 1,2021, a ltd. signed a 10

Question 1 On January 1,2021, A Ltd. signed a 10-year non-cancelable lease agreement...

50.1K

Verified Solution

Question

Accounting

Question 1
On January 1,2021, A Ltd. signed a 10-year non-cancelable lease agreement to lease a
storage building from S Ltd. The following information pertains to this lease agreement.
The agreement requires equal rental payments of $144,000 each Dec 31. The first lease
payment is made on 1 January 2021.
The fair value of the building on 1 January 2021 is $880,000.
The building has an estimated economic life of 12 years, with an unguaranteed residual
value of $20,000. A Ltd. depreciates similar buildings on the straight-line method.
The lease is nonrenewable. At the termination of the lease, the building reverts to the
lessor.
A Ltd.'s incremental borrowing rate is 12% per year. The lessor's implicit rate is not
known by A Ltd.
The yearly rental payment includes $4,941 of cost related to taxes on the property.
Required:
Prepare the journal entries on the A Ltd's books to reflect the signing of the lease agreement
and to record the payments and expenses related to this lease for the years 2021 and 2022. A
Ltd.'s year end is December 31.
image

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students