On January 1, 2017, Shamrock Co. leased a building to Pharoah Inc. The relevant

Question

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

Both the lessor and the lessee are on a calendar-year basis.

1. The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $3,100,000 (unguaranteed). 2. The leased building has a cost of $3,600,000 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. Pharoah has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Pharoah. 6.

Both the lessor and the lessee are on a calendar-year basis.

Prepare the journal entries that Pharoah should make in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually Round answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit 1/1/17 Right-of-Use Asset Lease Liabillity (To record the lease) 1/1/17 Lease Lability 275000 Cash 2750001 To record lease liability) 12/31/17 Lease Expense 275000 Right-of-Use Asset Lease Liability SHOW LIST OF ACCOUNTS If Pharoah paid $35,000 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

Explanation / Answer

1/1/17 Right of use Asset 310000

To Lease liability 275000

To Broker (Fee) 35000   

1/1/17 Lease liabilty 275000

To Cash 275000

1/1/17 Broker (Fee) 35000

To Cash 35000

12/31/17 Lease Expense 275000

Right of use Asset 310000

To Lease liability 275000

To Cash 310000

If Pharoah paid $3500 to a real estate broker on 1 January 2017 as a fee ,then the initial measurement of the right of use of asset is $310000.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.