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What is the amount of the lessees liability to the lessor

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Reference no: EM132382255

Question

Carla Vista Co. purchases land and constructs a service station and car wash for a total of $502500.

At January 2, 2018, when construction is completed, the facility and land on which it was constructed are sold to a major oil company for $550000 and immediately leased from the oil company by Carla Vista.

Fair value of the land at time of the sale was $52500. The lease is a 10-year, noncancelable lease. Carla Vista uses straight-line depreciation for its other various business holdings. The economic life of the facility is 15 years with zero salvage value.

Title to the facility and land will pass to Carla Vista at termination of the lease. A partial amortization schedule for this lease is as follows:

Payments Interest Amortization Balance

Jan. 2, 2018 $550000.00

Dec. 31, 2018 $89509.97 $55000.00 $34509.97 515490.03

Dec. 31, 2019 89509.97 51549.00 37960.97 477529.06

Dec. 31, 2020 89509.97 47752.91 41757.06 435772.00

What is the amount of the lessee's liability to the lessor after the December 31, 2020 payment?

Reference no: EM132382255

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