Crane Co. purchases land and constructs a service station and car wash for a total of $532500. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $590000 and immediately leased from the oil company by Crane. Fair value of the land at time of the sale was $58500. The lease is a 10-year, noncancelable lease. Crane uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value. Title to the facility and land will pass to Crane at termination of the lease. A partial amortization schedule for this lease is as follows: Payments Interest Amortization Balance Jan. 2, 2021 $590000.00 Dec. 31, 2021 $96019.78 $59000.00 $37019.78 552980.22 Dec. 31, 2022 96019.78 55298.02 40721.76 512258.46 Dec. 31, 2023 96019.78 51225.85 44793.93 467464.53 What is the amount of the lessee’s liability to the lessor after the December 31, 2023 payment? a. $552980 b. $590000 c. $467465 d. $512258
Crane Co. purchases land and constructs a service station and car wash for a total of $532500. At January 2, 2021, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $590000 and immediately leased from the oil company by Crane. Fair value of the land at time of the sale was $58500. The lease is a 10-year, noncancelable lease. Crane uses straight-line
|
Payments |
Interest |
Amortization |
Balance |
|||||
| Jan. 2, 2021 |
$590000.00 |
|||||||
| Dec. 31, 2021 |
$96019.78 |
$59000.00 |
$37019.78 |
552980.22 |
||||
| Dec. 31, 2022 |
96019.78 |
55298.02 |
40721.76 |
512258.46 |
||||
| Dec. 31, 2023 |
96019.78 |
51225.85 |
44793.93 |
467464.53 |
What is the amount of the lessee’s liability to the lessor after the December 31, 2023 payment?
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