Case 2: On January, 1 2021, Silver Company entered into a lease for floor space with the following information: Floor Space Annual rental payable at the beginning of each year Lease Term Incremental Borrowing Rate Implicit Interest Rate 500 square meters 300,000 7 years 8% 10% On January 1, 2024, Silver Company and the lessor agreed to amend the original terms of the lease with the following information: 200 square meters 120,000 10% 12% Floor Space Annual rental payable at the beginning of each year Incremental Borrowing Rate Implicit Interest Rate When present value is needed, round off the present value factor to two decimal places.

Case 2: On January, 1 2021, Silver Company entered into a lease for floor space with the following information: Floor Space Annual rental payable at the beginning of each year Lease Term Incremental Borrowing Rate Implicit Interest Rate 500 square meters 300,000 7 years 8% 10% On January 1, 2024, Silver Company and the lessor agreed to amend the original terms of the lease with the following information: 200 square meters 120,000 10% 12% Floor Space Annual rental payable at the beginning of each year Incremental Borrowing Rate Implicit Interest Rate When present value is needed, round off the present value factor to two decimal places.

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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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Case 2: On January, 1 2021, Silver Company entered into a lease for floor space with the following
information:
Floor Space
Annual rental payable at the beginning of each year
Lease Term
Incremental Borrowing Rate
Implicit Interest Rate
500 square meters
300,000
7 years
8%
10%
On January 1, 2024, Silver Company and the lessor agreed to amend the original terms of the lease
with the following information:
Floor Space
Annual rental payable at the beginning of each year
Incremental Borrowing Rate
Implicit Interest Rate
When present value is needed, round off the present value factor to two decimal places.
200 square meters
120,000
10%
12%

e. What is the carrying amount of the right of use asset as of December 31, 2024?
f. What is the carrying amount of the lease liability as of December 31, 2024?
g. What is the termination gain or loss to be recognized on January 1, 2024?

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