t the beginning of current year, Panorama Company leased a building form a lessor with the following pertinent information Annual rental payable at the end of each year 1,000,000 Initial direct cost paid 400,000 Lease incentive received 100,000 Leasehold improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of building 8 years Implicit interest rate 10% PV of an ordinary annuity of 1 for 5 periods at 10% 3.79 Present value of 1 for 5 periods at 10% 0.62
t the beginning of current year, Panorama Company leased a building form a lessor with the following pertinent information Annual rental payable at the end of each year 1,000,000 Initial direct cost paid 400,000 Lease incentive received 100,000 Leasehold improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of building 8 years Implicit interest rate 10% PV of an ordinary annuity of 1 for 5 periods at 10% 3.79 Present value of 1 for 5 periods at 10% 0.62
t the beginning of current year, Panorama Company leased a building form a lessor with the following pertinent information Annual rental payable at the end of each year 1,000,000 Initial direct cost paid 400,000 Lease incentive received 100,000 Leasehold improvement 200,000 Purchase option that is reasonably certain to be exercised 500,000 Lease term 5 years Useful life of building 8 years Implicit interest rate 10% PV of an ordinary annuity of 1 for 5 periods at 10% 3.79 Present value of 1 for 5 periods at 10% 0.62
At the beginning of current year, Panorama Company leased a building form a lessor with the following pertinent information
Annual rental payable at the end of each year
1,000,000
Initial direct cost paid
400,000
Lease incentive received
100,000
Leasehold improvement
200,000
Purchase option that is reasonably certain to be exercised
500,000
Lease term
5 years
Useful life of building
8 years
Implicit interest rate
10%
PV of an ordinary annuity of 1 for 5 periods at 10%
3.79
Present value of 1 for 5 periods at 10%
0.62
1. What is the cost of the right of use asset?
a. 4,500,000
b. 4,400,000
c. 4,700,000
d. 4,600,000
2. What is the depreciation for current year?
a. 880,000
b. 900,000
c. 550,000
d. 575,000
3. What is the interest expense for current year?
a. 410,000
b. 379,000
c. 450,000
d. 429,000
Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video
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