Question

n January 1, 2020, Tamarisk Co. leased a building to Carla Vista Inc. The relevant information related to the lease is as follows.

1.		The lease arrangement is for 10 years. The building is expected to have a residual value at the end of the lease of $2,700,000 (unguaranteed).
2.		The leased building has a cost of $3,200,000 and was purchased for cash on January 1, 2020.
3.		The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value.
4.		Lease payments are $260,000 per year and are made at the beginning of the year.
5.		Carla Vista has an incremental borrowing rate of 8%, and the rate implicit in the lease is unknown to Carla Vista.
6.		Both the lessor and the lessee are on a calendar-year basis.

1.Prepare the journal entries that Tamarisk should make in 2020.

Date	Account Titles and Explanation	Debit	Credit
1/1/2012/31/20
	(To record cost of the building)
1/1/2012/31/20
	(To record receipt of lease payment)
1/1/2012/31/20
	(To record the recognition of the revenue each period)
1/1/2012/31/20
	(To record depreciation expense on the leased asset)

2.Prepare the journal entries that Carla Vista should make in 2020.

Date	Account Titles and Explanation	Debit	Credit
1/1/2012/31/20
	(To record the lease)
1/1/2012/31/20
	(To record lease payment)
1/1/2012/31/20

3.If Carla Vista paid $25,000 to a real estate broker on January 1, 2020, as a fee for finding the lessor, what is the initial measurement of the right-of-use asset?