Use the Following Information for Questions

question 15

Multiple Choice

Use the following information for questions.
On January 1, 2011, Yancey, Inc.signs a 10-year noncancelable lease agreement to lease a storage building from Holt Warehouse Company.The following information pertains to this lease agreement.
(a) The agreement requires equal rental payments at the end of each year.
(b) The fair value of the building on January 1, 2011 is $3,000,000; however, the book value to Holt is $2,500,000.
(c) The building has an estimated economic life of 10 years, with no residual value.Yancey 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) Yancey's incremental borrowing rate is 11% per year.Holt Warehouse Co.set the annual rental to insure a 10% rate of return.The implicit rate of the lessor is known by Yancey, Inc.
(f) The yearly rental payment includes $10,000 of executory costs related to taxes on the property.
-Yancey, Inc.would record depreciation expense on this storage building in 2011 of (Rounded to the nearest dollar.)

• A)$0.
• B)$250,000.
• C)$300,000.
• D)$488,237.

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Internet Domain Name

A unique name that identifies a website on the internet, part of a network address that can represent an individual, business, or organization online.

Tax Losses

A financial situation where the expenses and deductions are greater than the income generated, potentially reducing taxable income in future periods.

Share Capital

The funds raised by a company through the issuance of shares, representing the amount invested by shareholders.

Exchange of Shares

A transaction where shares of one company are exchanged for shares of another company, often occurring in mergers and acquisitions.