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