Use the following Information for the following question. On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following Information pertains to this lesse agreement. (a) The agreement requires equal rental payments at the beginning each year. (b) The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000. (c) The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method. (d) At the termination of the lease, the title to the building will be transferred to the lessee. (e) Yancey's incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey, Inc. (6) The yearly rental payment includes $15,000 of executory costs related to taxes on the property. Yancey, Inc. would record amortization expense on this asset in 2021 of (rounded to the nearest dollar) O $0. $495,000. O $976,471. O $610,139.
Use the following Information for the following question. On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor. The following Information pertains to this lesse agreement. (a) The agreement requires equal rental payments at the beginning each year. (b) The fair value of the building on January 1, 2021 is $6,000,000; however, the book value to Holt is $4,950,000. (c) The building has an estimated economic life of 10 years, with no residual value. Yancey depreciates similar buildings using the straight-line method. (d) At the termination of the lease, the title to the building will be transferred to the lessee. (e) Yancey's incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey, Inc. (6) The yearly rental payment includes $15,000 of executory costs related to taxes on the property. Yancey, Inc. would record amortization expense on this asset in 2021 of (rounded to the nearest dollar) O $0. $495,000. O $976,471. O $610,139.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Use the following Information for the following question.
On January 1, 2021, Yancey, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt
Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties
surround the amount of costs yet to be incurred by the lessor. The following Information pertains to this lesse
agreement.
(a) The agreement requires equal rental payments at the beginning each year.
(b) The fair value of the building on January 1, 2021 is $6,000,000; however, the book value
to Holt is $4,950,000.
(c) The building has an estimated economic life of 10 years, with no residual value. Yancey
depreciates similar buildings using the straight-line method.
(d) At the termination of the lease, the title to the building will be transferred to the lessee.
(e) Yancey's incremental borrowing rate is 11% per year. Holt Warehouse Co. set the annual
rental to insure a 10% rate of return. The implicit rate of the lessor is known by Yancey,
Inc.
(6) The yearly rental payment includes $15,000 of executory costs related to taxes on the
property.
Yancey, Inc. would record amortization expense on this asset in 2021 of (rounded to the nearest dollar)
O
$0.
$495,000.
O $976,471.
O $610,139.
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