Problem 3 At the beginning of the current year, CBX Company sold a building with remaining life of 20 years and immediately leased it back for 5 years. Sales price at above fair value Fair value of building Carrying amount of building Annual rental payable at the end of each year Implicit interest rate Present value of an ordinary annuity of 1 at 12% for five periods 20,000,000 18,000,000 10,800,000 1,500,000 12% 12% 1. What amount should be reported as initial lease liability? 2. What amount should be recognized as cost of right of use asset? 3. What amount should be reported as gain on right transferred to the buyer-lessor? 4. What amount should be recognized as gross rental income of the buyer-lessor? 5. What amount should be recognized as depreciation of the building of the buyer-lessor?

Problem 3 At the beginning of the current year, CBX Company sold a building with remaining life of 20 years and immediately leased it back for 5 years. Sales price at above fair value Fair value of building Carrying amount of building Annual rental payable at the end of each year Implicit interest rate Present value of an ordinary annuity of 1 at 12% for five periods 20,000,000 18,000,000 10,800,000 1,500,000 12% 12% 1. What amount should be reported as initial lease liability? 2. What amount should be recognized as cost of right of use asset? 3. What amount should be reported as gain on right transferred to the buyer-lessor? 4. What amount should be recognized as gross rental income of the buyer-lessor? 5. What amount should be recognized as depreciation of the building of the buyer-lessor?

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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