On January 1, Espinoza Moving and Storage leased a truck for a four-year period, at which time possession ofthe truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year,calculated by the lessor using a 5% discount rate. If Espinoza’s revenues exceed a specified amount during thelease term, Espinoza will pay an additional $4,000 lease payment at the end of the lease. Espinoza estimates a60% probability of meeting the target revenue amount. What amount, if any, should be added to the right-of-useasset and lease liability under the contingent rent agreement?

On January 1, Espinoza Moving and Storage leased a truck for a four-year period, at which time possession ofthe truck will revert back to the lessor. Annual lease payments are $10,000 due on December 31 of each year,calculated by the lessor using a 5% discount rate. If Espinoza’s revenues exceed a specified amount during thelease term, Espinoza will pay an additional $4,000 lease payment at the end of the lease. Espinoza estimates a60% probability of meeting the target revenue amount. What amount, if any, should be added to the right-of-useasset and lease liability under the contingent rent agreement?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter5: Introduction To Business Expenses

Section: Chapter Questions

Problem 61P

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