On January 2, year 1, Ral Co. leased land and building from an unrelated lessor for a ten-year term. The lease has a renewal option for an additional ten years, but Ral has not reached a decision with regard to the renewal option. In early January of year 1, Ral completed the following improvements to the property: Sales Office Estimated Life: 10 Years Cost: $47,000 Warehouse Estimated Life: 25 Years Cost: $75,000 Parking Lot Estimated Life: 15 Years Cost: $18,000 Amortization of leasehold improvements for year 2 should be?

On January 2, year 1, Ral Co. leased land and building from an unrelated lessor for a ten-year term. The lease has a renewal option for an additional ten years, but Ral has not reached a decision with regard to the renewal option. In early January of year 1, Ral completed the following improvements to the property: Sales Office Estimated Life: 10 Years Cost: $47,000 Warehouse Estimated Life: 25 Years Cost: $75,000 Parking Lot Estimated Life: 15 Years Cost: $18,000 Amortization of leasehold improvements for year 2 should be?

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Description: On January 2, year 1, Ral Co. leased land and building from an unrelated lessor for a ten-year term. The lease has arenewal option for an additional ten years, but Ral has not reached a decision with regard to the renewal option. In earlyJanuary of

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

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

On January 2, year 1, Ral Co. leased land and building from an unrelated lessor for a ten-year term. The lease has a
renewal option for an additional ten years, but Ral has not reached a decision with regard to the renewal option. In early
January of year 1, Ral completed the following improvements to the property:
Sales Office
Estimated Life: 10 Years
Cost: $47,000
Warehouse
Estimated Life: 25 Years
Cost: $75,000
Parking Lot
Estimated Life: 15 Years
Cost: $18,000
Amortization of leasehold improvements for year 2 should be?

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