Reference no: EM133008888
Question - On January 1, 2017, Gold Company entered into a 5-year lease of a floor of a building with the following terms:
Annual rental for the first two years payable at the end of each year 200,000
Annual rental for the next three years payable at the end of each year 300,000
Initial direct cost paid by lessee 100,000
Leasehold improvement 250,000
Estimated cost of restoration required by contract 50,000
Useful life of the building 20 years
Implicit interest rate 8%
PV of an ordinary annuity of 1 at 8% for two periods 1.783
PV of an ordinary annuity of 1 at 8% for three periods 2.577
PV of 1 at 8% for two periods 0.857
1) What is the cost of the right of use asset?
a. 1,438,500
b. 1,169,147
c. 1,419,147
d. 1,279,700
2) What is the depreciation for 2017?
a. 255,940
b. 58,457
c. 283,829
d. 233,829
3) What is the initial lease liability?
a. 1,129,700
b. 1,019,147
c. 1,288,500
d. 1,300,000
4) What is the interest expense for 2017?
a. 90,376
b. 103,080
c. 81,532
d. 104,000