VICTE I VICIOSCurrent Attempt in ProgressSunland Company leases a building to Splish Brothers, Inc. on January 1, 2020. The following facts pertain to the lease agreement.1.2.3.4.5.The lease term is 5 years, with equal annual rental payments of $6,050 at the beginning of each year.Ownership does not transfer at the end of the lease term, there is no bargain purchase option, and the asset is not of aspecialized nature.The building has a fair value of $30,000, a book value to Sunland of $23,000, and a useful life of 6 years.At the end of the lease term, Sunland and Splish Brothers expect there to be an unguaranteed residual value of $5,750.Sunland wants to earn a return of 8% on the lease, and collectibility of the payments is probable. Splish Brothers was unawareof the implicit rate used in the lease by Sunland and has an incremental borrowing rate of 9%.How would Sunland (lessor) and Splish Brothers (lessee) classify this lease?Sunland would classify the lease as aSplish Brothers would classify the lease as a sales-type VLease receivableoperating$How would Sunland initially measure the lease receivable, and how would Splish Brothers initially measure the lease liability and right-of-use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimalplaces, e.g. 5,275.)Present value of lease pay $lease.SunlandLease Liability/Right-of-Use Asset $lease.Splish Brothers

Lease is a transaction where lessor and lessee will enter into an agreement for the purpose of right…

How would Sunland (lessor) and Splish Brothers (lessee) classify this lease? Sunland would classify the lease as a operating ✓ lease. Splish Brothers would classify the lease as a sales-type How would Sunland initially measure the lease receivable, and how would Splish Brothers initially measure the lease liability and right- of-use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275.) Lease receivable Present value of lease pay $ $ tA Lease Liability/Right-of-Use Asset $ Sunland lease. Splish Brothers

How would Sunland (lessor) and Splish Brothers (lessee) classify this lease? Sunland would classify the lease as a operating ✓ lease. Splish Brothers would classify the lease as a sales-type How would Sunland initially measure the lease receivable, and how would Splish Brothers initially measure the lease liability and right- of-use asset? (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275.) Lease receivable Present value of lease pay $ $ tA Lease Liability/Right-of-Use Asset $ Sunland lease. Splish Brothers

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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