Use the following information for questions 54

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Use the following information for questions 54 through 59. (Annuity tables on page 21-20.) On January 1, 2011, Yancey, 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 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. 54. What is the amount of the minimum annual lease payment? (Rounded to the nearest dollar.) 55. What is the amount of the total annual lease payment? 56. From the lessee's viewpoint, what type of lease exists in this case? 57. From the lessor's viewpoint, what type of lease is involved? a. Sales-type lease b. Sale-leaseback c. Direct-financing lease d. Operating lease 58. Yancey, Inc. would record depreciation expense on this storage building in 2011 of (Rounded to the nearest dollar.) 21 - 13
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59. If the lease were nonrenewable, there was no purchase option, title to the building does not pass to the lessee at termination of the lease and the lease were only for eight years, what type of lease would this be for the lessee? 60. Metcalf Company leases a machine from Vollmer Corp. under an agreement which meets the criteria to be a capital lease for Metcalf. The six-year lease requires payment of $102,000 at the beginning of each year, including $15,000 per year for maintenance, insurance, and taxes. The incremental borrowing rate for the lessee is 10%; the lessor's implicit rate is 8% and is known by the lessee. The present value of an annuity due of 1 for six years at 10% is 4.79079. The present value of an annuity due of 1 for six years at 8% is 4.99271. Metcalf should record the leased asset at
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