SOLVED

6) On January 1, 2017, Pelvisee Company entered a lease to rent office space. The lease requires Pelvisee to pay $390,000 per year, at the beginning of each year, for 15 years. The lease is non-cancellable and non-renewable. The building’s estimated useful life is 30 years, and its current fair value is estimated to be $6 million. Pelvisee’s incremental borrowing rate is 9%. Required: Classify this lease for Pelvisee Company and record the journal entries for the first year of the lease. 7) On January 1, 2017, Travic Company entered a lease to rent office space. The lease requires Travic to pay $390,000 per year, at the end of each year, for 20 years. The lease is non-cancellable and non-renewable. The building’s estimated useful life is 30 years, and its current fair value is estimated to be $6 million. Travic’s incremental borrowing rate is 10%. Required: Classify this lease for Travic Company and record the journal entries for the first year of the lease. 8) On January 1, 2017, Granite Company entered a lease to rent office space. The lease requires $350,000 per year, at the beginning of each year, for 20 years. The lease is non-cancellable and non-renewable. The building’s estimated useful life is 30 years, and its current fair value is estimated to be $6 million. The incremental borrowing rate is 5%. Required: Classify this lease and record the journal entries for the first year of the lease.