The lessor Domaris leases for 25 years a plot of land and the warehouse built on it, for a single annual payment of 150,000. To classify each element separately, Domaris must allocate this payment. At the inception date, the fair value of the leasehold interest in the land is 1,200,000 and that of the leasehold interest in the building is 2,800,000. Compute the annual share of the payment allocated to the land and the share allocated to the building.
- Total annual payment
- 150,000
- Fair value of the leasehold interest in the land
- 1,200,000
- Fair value of the leasehold interest in the building
- 2,800,000