What happens with the net book value of the lease

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I have the following lease 20 years, variable payments first year $5,644,000 it will increase every year at 2.50%, FMV at the beginning of the lease $91,061,451.

It is a capital lease. We will amortized at 6% and depreciate the NPV over 28 years the life of the asset. I hope you know the entries to record this lease

At the end of year 14 The Unamortized balance is $41,574,331 and the Net Book Value is $39,433,148.

We decide to purchase the building at the Beginning of year 15 at FMV for $97,300,000.

Questions

1) What happens with the Net book value of the lease?

2) What happens to the Un-amortized balance?

3) What life should we use to depreciate the purchased asset?

Reference no: EM131535932

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Reviews

len1535932

6/19/2017 2:17:25 AM

Please read the question. I all our answer refer to the FASB or ASU that you are basing your answer. DO NOT GIVE ME any lecture or notes on Capital leases I already know all the literature about it. I am only looking for answer to the problem.

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