Reference no: EM133178716
Question - On January 1, 2022, Neko Company (leasee) have entered into lease agreement with Khloe company (leasor), below are the terms of the lease: 10 year rent of office space with an option to extend rent for an additional 5 years. The contract includes other charges such as cleaning services, security services as well as the utilities. The office space also includes cabinets and built-in tables.
The 1st monthly payment details are as follows:
Office space 30,000
Cabinets 1,000
Air-conditioning unit 20,000
Utilities 10,000
Cleaning services 500
Security services 500
Property Tax 1,000
Total 61,000
Required - Answer the following:
1. What are the non-lease components in the contract and how should it be recognized in the books?
2. What is the specified asset in the contract?
3. What is the date of the enforceable period?
4. What is the amount of lease component to be recorded?
5. What is the amount of non-lease component to be recorded?
6. What is the amount of other expense that cannot be classified under lease and non-lease component?
7. On July 31, 2022, Khloe company decided to cancel the lease. Is this valid? Why and why not?