pany opted to report income from improvement using the lump-sum method an

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Determine the income to be reported by ML partnership in 2020
assuming the company opted to report income from improvement using
the lump-sum method and spread-out method.

DI
Claude leased a facility from ML partnership in January 1, 2018. Terms of
the lease were as follows:
Annual rental
300,000
Annual real property tax assumed and paid by Claude 50,000
Security deposit
Lease term
12 years
On January 1, 2018, Claude paid the annual rental for 2018 and 2019
including the security deposit (non-refundable). In addition to annual
rental and real property taxes, part of the lease was for Claude to improve
the facility. The improvement was completed on January 1, 2020. Details
of the improvements were as follows:
Cost of leasehold improvement 6,000,000
Estimated useful life of improvement 15 years
Determine the income to be reported by ML partnership in 2020
assuming the company opted to report income from improvement using
the lump-sum method.
48%
Transcribed Image Text:DI Claude leased a facility from ML partnership in January 1, 2018. Terms of the lease were as follows: Annual rental 300,000 Annual real property tax assumed and paid by Claude 50,000 Security deposit Lease term 12 years On January 1, 2018, Claude paid the annual rental for 2018 and 2019 including the security deposit (non-refundable). In addition to annual rental and real property taxes, part of the lease was for Claude to improve the facility. The improvement was completed on January 1, 2020. Details of the improvements were as follows: Cost of leasehold improvement 6,000,000 Estimated useful life of improvement 15 years Determine the income to be reported by ML partnership in 2020 assuming the company opted to report income from improvement using the lump-sum method. 48%
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