Determine the income to be reported by ML partnership in 2020assuming the company opted to report income from improvement usingthe lump-sum method and spread-out method. DIClaude leased a facility from ML partnership in January 1, 2018. Terms ofthe lease were as follows:Annual rental300,000Annual real property tax assumed and paid by Claude 50,000Security depositLease term12 yearsOn January 1, 2018, Claude paid the annual rental for 2018 and 2019including the security deposit (non-refundable). In addition to annualrental and real property taxes, part of the lease was for Claude to improvethe facility. The improvement was completed on January 1, 2020. Detailsof the improvements were as follows:Cost of leasehold improvement 6,000,000Estimated useful life of improvement 15 yearsDetermine the income to be reported by ML partnership in 2020assuming the company opted to report income from improvement usingthe lump-sum method.48%

Rental income refers to the sum value of money earned by an entity through its rental properties.…

Answered: pany opted to report income from…

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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Question

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%

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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