Business, 14.05.2021 01:00 icantdomath6303

On January 1,2018, Cullumber, Inc. signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company. Collectibility of lease payments is reasonably predictable and no important uncertainties surround the amount of costs yet to be incurred by the lessor The following information pertains to this lease agreement (a) The agreement requires equal rental payments at the beginning each year.
(b) The fair value of the building on January 1,2018 is $6600000; however, the book value to Holt is $5550000.
c) The building has an estimated economic life of 10 years, with no residual value. Cullumber depreciates similar buildings on the straight-line method
(d) At the termination of the lease, the title to the building will be transferred to the lessee.
e) Cullumber's incremental borrowing rate is 10% per year. Holt Warehouse Co. set the annual rental to insure a 8% rate of return. The implicit rate of the lessor is known by Cullumber, Inc.
(f) The yearly rental payment includes $16200 of executory costs related to taxes on the property.
Period 5% 6% 8% -10%- 12%
1 100000 100000 100000 100000 100000
2 2.05000 2.06000 2.08000 2.10000 2.12000
3 3.15250 3.18360 3.24640 3.31000 3.37440
4 4.31013 437462450611 4.64100 4.77933
5 5.52563 5.63709 5.86660 6.10510 6.35285
6 680191 6975327.33592 7.71561 8.11519
7 8.14201 8.39384 8.92280 948717 10.08901
8 9.54911 9.89747 10.63663 1143589 12.29969
9 11.02656 1149132 12.48756 13.57948 14.77566
10 12.57789 13.18079 14.48656 15.93743 17.54874
Period 5% 6% 8% 10% 12%
1 1.00000 1.00000 1.00000 1.00000 1.00000
2 1.95238 1.94340 192593 190909 189286
2. 285941 2.83339 2.78326 2.73554 2.69005
4. 3.72325 3.67301 3.57710 348685 3.40183
5. 54595 446511 4.31213 4.16986 4.03735
6. 5.32948 5.21236 4.99271 4.79079 4.60478
7 6.07569 5.91732 5.62288 5.35526 5.11141
8 6.78637 6.58238 6.20637 5.86842 5.56376
9. 746321 7.20979 6.74664 6.33493 5.96764
10 8.10782 7,80169 7.24689 6.75902 6.32825
What is the amount of the minimum annual lease payment? (Rounded to the nearest dollar.)
a. $926936
b. $250736
c. $894536
d. $910736

Answers: 3

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On January 1,2018, Cullumber, Inc. signs a 10-year noncancelable lease agreement to lease a storage...

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