Suppose that in addition to the $159,660 annual rental payments, Marin is also required to pay $12,000 for insurance costs each year on the building directly to the lessor, Aero Field. How would this executory cost affect the initial measurement of the lease liability and right-of-use asset? (Round answer to O decimal places, eg. 5,275) Lease liability $

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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Suppose that in addition to the $159,660 annual rental payments, Marin is also required to pay $12,000 for insurance costs
each year on the building directly to the lessor, Aero Field. How would this executory cost affect the initial measurement of the
lease liability and right-of-use asset? (Round answer to O decimal places, eg. 5,275.)
Lease liability
24
Transcribed Image Text:Suppose that in addition to the $159,660 annual rental payments, Marin is also required to pay $12,000 for insurance costs each year on the building directly to the lessor, Aero Field. How would this executory cost affect the initial measurement of the lease liability and right-of-use asset? (Round answer to O decimal places, eg. 5,275.) Lease liability 24
Assume that on December 31, 2019, Marin Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero
Field Management Company. The following information pertains to this lease agreement:
1.
The agreement requires equal rental payments of $159,660 beginning on December 31, 2019.
2.
The fair value of the building on December 31, 2019 is $1,082,878.
The building has an estimated economic life of 10 years, a guaranteed residual value of $50,900, and an expected residual
value of $36,100. Marin depreciates similar buildings on the straight-line method.
3.
4.
The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor.
Marin's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Marin.
5.
Transcribed Image Text:Assume that on December 31, 2019, Marin Aerospace signs a 8-year, non-cancelable lease agreement to lease a hanger from Aero Field Management Company. The following information pertains to this lease agreement: 1. The agreement requires equal rental payments of $159,660 beginning on December 31, 2019. 2. The fair value of the building on December 31, 2019 is $1,082,878. The building has an estimated economic life of 10 years, a guaranteed residual value of $50,900, and an expected residual value of $36,100. Marin depreciates similar buildings on the straight-line method. 3. 4. The lease is nonrenewable. At the termination of the lease, the building reverts to the lessor. Marin's incremental borrowing rate is 6% per year. The lessor's implicit rate is not known by Marin. 5.
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