1. What is the cost of the right of use asset?2. What is the depreciation for current year? At the beginning of current year, Panorama Company leased a building from a lessor withthe following pertinent information:Annual rental payable at the end of each yearInitial direct cost paidLease incentive received1,000,000400,000100,000200,000Purchase option that is reasonably certain to be exercised 500,0005 years8 years10%Leasehold improvementLease termUseful life of buildingImplicit interest ratePV of an ordinary annuity of 1 for 5 periods at 10%Present value of 1 for 5 periods at 10%3.790.62

Right of use asset is initially measured at cost, which consists of a.) Present value of minimum…

At the beginning of current year, Panorama Company leased a building from a lessor with the following pertinent information: Annual rental payable at the end of each year Initial direct cost paid Lease incentive received Leasehold improvement 1,000,000 400,000 100,000 200,000 Purchase option that is reasonably certain to be exercised 500,000 5 years 8 years 10% 3.79 0.62 Lease term Useful life of building Implicit interest rate PV of an ordinary annuity of 1 for 5 periods at 10% Present value of 1 for 5 periods at 10%

At the beginning of current year, Panorama Company leased a building from a lessor with the following pertinent information: Annual rental payable at the end of each year Initial direct cost paid Lease incentive received Leasehold improvement 1,000,000 400,000 100,000 200,000 Purchase option that is reasonably certain to be exercised 500,000 5 years 8 years 10% 3.79 0.62 Lease term Useful life of building Implicit interest rate PV of an ordinary annuity of 1 for 5 periods at 10% Present value of 1 for 5 periods at 10%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. What is the cost of the right of use asset?

2. What is the depreciation for current year?

At the beginning of current year, Panorama Company leased a building from a lessor with
the following pertinent information:
Annual rental payable at the end of each year
Initial direct cost paid
Lease incentive received
1,000,000
400,000
100,000
200,000
Purchase option that is reasonably certain to be exercised 500,000
5 years
8 years
10%
Leasehold improvement
Lease term
Useful life of building
Implicit interest rate
PV of an ordinary annuity of 1 for 5 periods at 10%
Present value of 1 for 5 periods at 10%
3.79
0.62

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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