The property company Belcastre leases out a hotel site made up of land and a building. At the commencement date, the lessee pays a lump-sum upfront payment of 400,000, then an annual payment of 90,000. At the inception date, the fair values of the leasehold interests amount to 1,000,000 for the land and 1,500,000 for the building. Compute the share of the upfront payment and the share of the annual payment allocated to the building.
- Lump-sum upfront payment
- 400,000
- Annual payment
- 90,000
- Fair value of the leasehold interest in the land
- 1,000,000
- Fair value of the leasehold interest in the building
- 1,500,000