Gage Co. purchases land and constructs a service station and car wash for a total of P540,000. 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 P600,000 and immediately leased from the oil company by Gage. Fair value of the land at time of the sale was P60,000. The lease is a 10-year, noncancellable lease. Gage 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 Gage at termination of the lease. A partial amortization schedule for this lease is as follows: Payment Interest Amortization Balance Jan. 2, 2018 600,0000 Dec. 31, 2018 97,646.71 60,000.00 37,646.71 562,353.29 Dec. 31, 2019 97,646.71 56,235.33 41,411.38 520,941.91 Dec. 31, 2020 97,646.71 52,094.19 45,552.52 475,389.39 The total lease-related income recognized by the lessee during 2019 is? Answer: 0 Question: Why is that the total lease-related income recognized by the lessee during 2019 is 0? Explain further.
Gage Co. purchases land and constructs a service station and car wash for a total of P540,000. 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 P600,000 and immediately leased from the oil company by Gage. Fair value of the land at time of the sale was P60,000. The lease is a 10-year, noncancellable lease. Gage 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 Gage at termination of the lease. A partial amortization schedule for this lease is as follows: Payment Interest Amortization Balance Jan. 2, 2018 600,0000 Dec. 31, 2018 97,646.71 60,000.00 37,646.71 562,353.29 Dec. 31, 2019 97,646.71 56,235.33 41,411.38 520,941.91 Dec. 31, 2020 97,646.71 52,094.19 45,552.52 475,389.39 The total lease-related income recognized by the lessee during 2019 is? Answer: 0 Question: Why is that the total lease-related income recognized by the lessee during 2019 is 0? Explain further.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Gage Co. purchases land and constructs a service station and car wash for a total of P540,000. 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 P600,000 and immediately leased from the oil company by Gage. Fair value of the land at time of the sale was P60,000. The lease is a 10-year, noncancellable lease. Gage uses straight-line
| Payment | Interest | Amortization | Balance | |
| Jan. 2, 2018 | 600,0000 | |||
| Dec. 31, 2018 | 97,646.71 | 60,000.00 | 37,646.71 | 562,353.29 |
| Dec. 31, 2019 | 97,646.71 | 56,235.33 | 41,411.38 | 520,941.91 |
| Dec. 31, 2020 | 97,646.71 | 52,094.19 | 45,552.52 | 475,389.39 |
The total lease-related income recognized by the lessee during 2019 is? Answer: 0
Question: Why is that the total lease-related income recognized by the lessee during 2019 is 0? Explain further.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education