Question

On January 1, 2020, Sage Hill Co. leased a building to Oriole Inc. The relevant information related to the lease is as follows. 1. 2. 3. 4. 5. 6. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $2,800,000 (unguaranteed). The leased building has a cost of $3,300,000 and was purchased for cash on January 1, 2020. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. Lease payments are $270,000 per year and are made at the beginning of the year. Oriole has an incremental borrowing rate of 6%, and the rate implicit in the lease is unknown to Oriole. Both the lessor and the lessee are on a calendar-year basis. Click here to view factor tables. (For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Prepare the journal entries that Sage Hill should make in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record cost of the building) (To record receipt of lease payment) * LHH HH HH HH (To record the recognition of the revenue each period) (To record depreciation expense on the leased asset) Prepare the journal entries that Oriole should make in 2020. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record the lease) U (To record lease payment) U If Oriole paid $35,000 to a real estate broker on January 1, 2020, as a fee for finding the lessor, what is the initial measurement of the right-of-use asset? Right-of-use asset SL

Answer 1

No O Ansoce enu On Tanl, 03o Balding*3300,000 0,000 Uneaned tease Uevenue On dec 31, 2080, 40,000 COneavined lease yevenue Depresiation ezpense 3300,000 66000 50anP Dade Paticuar Debib Caeclit Building Cars 3300,000 3300,000 Carh Uneanned teas e vtevenue 010,000 Cneained ase revcnc 0,000 ease evenuie Q10000 $66000 Depteciation expene Acamulahed depeciahion-leased buibig 466000

NO (a LAA noyca n* 6 On dec3 0a0 1-Gito.D6S0 240,000 X O.06 6y x 6/ QHo,000 X 7.801692274 Q10645 40,000) x 6 836451 X6 no18 Payfbtof Cse auseb on a0 10646 On dec 3, 2000, Kightuac aet 240,000 159813

NO (3 Patiauda Date Debit Gedib Kighb ofvee aet Lease liabibty 1120 $ 2106457 a10645 Lease liabilily 20 0,000 Cash 10.000 Leabe expense t220 Q0,000 Kight ofse and hcase liabilbky $159813 10187 Right ofye as 3 asInttial measuorement as lialili f prepaid lcar paye- Xcase frentives received Snitial direct cort 10645 240,000- aH0,000 35000 21415 14145 .Right Une anset