On January 1, 2018, Yancey, Inc. signs a 10 year concancelable lease agreement to lease a storage building from Holt Warehouse company. Lease payments is predictable and no important uncertainties surround the amount of costs to be incurred by the lessor: Following information: 1. equal rental payments at beginning of each year 2. Fair value of building is $6,000,000, book value is $4,950,000 3. Building has a life of 10 years with no residual value. Yancey uses straight line method 4. At end of lease, ownership transfer to the lessee.
On January 1, 2018, Yancey, Inc. signs a 10 year concancelable lease agreement to lease a storage building from Holt Warehouse company. Lease payments is predictable and no important uncertainties surround the amount of costs to be incurred by the lessor: Following information:
1. equal rental payments at beginning of each year
2. Fair value of building is $6,000,000, book value is $4,950,000
3. Building has a life of 10 years with no residual value. Yancey uses
4. At end of lease, ownership transfer to the lessee.
5. Yancey's borrowing rate is 11%. Holt set the annual rental to insure a 10%
6. The yearly rental payment includes $15,000 of executory costs.
What is the amount of the total annual lease payment?
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