LAC Has Negotiated a Lease Agreement with LEC Effective January

question 163

Essay

LAC has negotiated a lease agreement with LEC effective January 1,2014.LAC will provide LEC with a special-purpose building for ten (10)years.The lease is non-cancellable; requires LEC to provide maintenance,insurance,taxes,etc.; and stipulates that the building reverts back to LAC's control at the end of the lease.The building cost LAC $200,000 and is expected to have no residual value at the end of the lease.LAC expects a 15% return on investments and the lease qualifies as a direct financing lease.Rents are paid each December 31 starting in 2014.
(a)How much annual rent will the lessee pay (rounded to the nearest dollar)? $______________________________.
(b)Complete the following schedule of lease amortization for the lessee for the first two years:
(c)Complete the following entries for the lessee: January 1,2014,inception of lease.
December 31,2014,first rental payment and lessee's year-end entries (end of the accounting period).
December 31,2014,accrual by lessee of $4,000 taxes on the building and payment of $800 for repairs on the building.

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Definitions:

Imprinting

A rapid learning process that occurs in some animals early in life, whereby they establish a behavior pattern or social attachment.

Social Attachment Process

The formation of a strong emotional bond between individuals, crucial for personal development and social integration.

Young Ducks

Often referenced in imprinting studies, highlighting the critical period shortly after birth when they form attachments and follow moving objects.

Behavior Systems Approach

A theoretical perspective that views behavior as the outcome of integrated biological and psychological systems.