221k views
1 vote
On January 1, 20X5, Wren Co. leased a building to Brill under an operating lease for 10 years at $50,000 per year, payable the first day of each lease year. Wren paid $15,000 to a real estate broker as a finder's fee. The building is depreciating $12,000 per year. For 20X5, Wren incurred insurance and property tax expenses totaling $9,000. Wren's net rental income for 20X5 should be:______.

a) $27,500.

b) 9,000.

c) $35,000.

d) $36,500.

1 Answer

5 votes

Answer:

$27,500

Step-by-step explanation:

The computation of net rental income is shown below:-

The broker's fee ($15,000) should be amortized equally based over the 10 years of the lease, or $1,500 a year

Operating lease per year + Building depreciation + Property tax expenses totaling + Time period

= $50,000 - $12,000 - $9,000 - $1,500

= $27,500

Therefore, for computing the operating lease per we year we simply applied the above formula.

User Piotr Tomasik
by
8.0k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.