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Recording Operating Lease Entries-Lessor On January 1, 2020, Merick Inc. purchased a building for $4 million to be leased. The building is expected to have a 45-year life with no salvage value. The building was leased immediately by Kregor Construction for $260,000 a year payable January 1 of each year starting January 1, 2020. The lease term is five years with no renewal or purchase option reasonably expected to be exercised. There are no uncertainties surrounding collection. The implicit rate of the lease is 7% known by Kregor Construction. Required a. How would Merick Inc. classify the lease? b. Prepare the entries for Merick Inc. for 2020. Note: Round your answers to the nearest whole dollar. Account Name Dr. Date Jan. 1, 2020 ◆ Cr.

Recording Operating Lease Entries-Lessor On January 1, 2020, Merick Inc. purchased a building for $4 million to be leased. The building is expected to have a 45-year life with no salvage value. The building was leased immediately by Kregor Construction for $260,000 a year payable January 1 of each year starting January 1, 2020. The lease term is five years with no renewal or purchase option reasonably expected to be exercised. There are no uncertainties surrounding collection. The implicit rate of the lease is 7% known by Kregor Construction. Required a. How would Merick Inc. classify the lease? b. Prepare the entries for Merick Inc. for 2020. Note: Round your answers to the nearest whole dollar. Account Name Dr. Date Jan. 1, 2020 ◆ Cr.

FINANCIAL ACCOUNTING
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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am. 05.

Note: Round your answers to the nearest whole dollar. Account Name Dr. Date Jan. 1, 2020 Dec. 31, 2020 Dec. 31, 2020 Dec. 31, 2020 ◆ To record receipt of lease payment To record revenue ◄► ◆ → To record depreciation c. Prepare the entries for Merick Inc. to record legal fees of $2,000 incurred on January 1, 2020, for the execution of the lease and the related adjusting entry on December 31, 2020. Cr. Date Account Name Dr. Jan. 1, 2020 ♦ → → Cr. ¶
Transcribed Image Text:Note: Round your answers to the nearest whole dollar. Account Name Dr. Date Jan. 1, 2020 Dec. 31, 2020 Dec. 31, 2020 Dec. 31, 2020 ◆ To record receipt of lease payment To record revenue ◄► ◆ → To record depreciation c. Prepare the entries for Merick Inc. to record legal fees of $2,000 incurred on January 1, 2020, for the execution of the lease and the related adjusting entry on December 31, 2020. Cr. Date Account Name Dr. Jan. 1, 2020 ♦ → → Cr. ¶
Recording Operating Lease Entries-Lessor On January 1, 2020, Merick Inc. purchased a building for $4 million to be leased. The building is expected to have a 45-year life with no salvage value. The building was leased immediately by Kregor Construction for $260,000 a year payable January 1 of each year starting January 1, 2020. The lease term is five years with no renewal or purchase option reasonably expected to be exercised. There are no uncertainties surrounding collection. The implicit rate of the lease is 7% known by Kregor Construction. Required a. How would Merick Inc. classify the lease? b. Prepare the entries for Merick Inc. for 2020. Note: Round your answers to the nearest whole dollar. Dr. Date Jan. 1, 2020 Account Name Cr.
Transcribed Image Text:Recording Operating Lease Entries-Lessor On January 1, 2020, Merick Inc. purchased a building for $4 million to be leased. The building is expected to have a 45-year life with no salvage value. The building was leased immediately by Kregor Construction for $260,000 a year payable January 1 of each year starting January 1, 2020. The lease term is five years with no renewal or purchase option reasonably expected to be exercised. There are no uncertainties surrounding collection. The implicit rate of the lease is 7% known by Kregor Construction. Required a. How would Merick Inc. classify the lease? b. Prepare the entries for Merick Inc. for 2020. Note: Round your answers to the nearest whole dollar. Dr. Date Jan. 1, 2020 Account Name Cr.
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