Question

On January 1, 2017, Panorama Company leased a building from a lessor with the following pertinent information: - Annual rental payable at the end of each year: $1,000,000 - Initial direct cost paid: $400,000 - Lease incentive received: $100,000 - Leasehold improvement: $200,000 - Purchase option that is reasonably certain to be exercised: $500,000 - Lease term: 5 years - Useful life of the building: 8 years - Implicit interest rate: 10% - Present value of an ordinary annuity of 1 for 5 at 10%: 3.79 - Present value of 1 for 5 at 10%: 0.62 A. What is the cost of the right of use? B. What is the depreciation for the current year? C. What is the interest expense for the current year? D. What is the lease liability at year-end?

          On January 1, 2017, Panorama Company leased a building from a lessor with the following pertinent information: 
- Annual rental payable at the end of each year: $1,000,000 
- Initial direct cost paid: $400,000 
- Lease incentive received: $100,000 
- Leasehold improvement: $200,000 
- Purchase option that is reasonably certain to be exercised: $500,000 
- Lease term: 5 years 
- Useful life of the building: 8 years 
- Implicit interest rate: 10% 
- Present value of an ordinary annuity of 1 for 5 at 10%: 3.79 
- Present value of 1 for 5 at 10%: 0.62

A. What is the cost of the right of use?
B. What is the depreciation for the current year?
C. What is the interest expense for the current year?
D. What is the lease liability at year-end?

Added by Lidia H.

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