OnJuly 1, 2008, Falk Company signed a contract to lease space in abuilding for 20 years. The lease contract calls for annual(prepaid) rental payments of $100,000 on each July 1 throughout thelife of the lease and for the lessee to pay for all additions andimprovements to the leased property. On June 25, 2013, Falk decidesto sublease the space to Ryan & Associates for the remaining 15years of the lease?Ryan pays $260,000 to Falk for the right tosublease and it agrees to assume the obligation to pay the $100,000annual rent to the building owner beginning July 1, 2013. Aftertaking possession of the leased space, Ryan pays for improving theoffice portion of the leased space at a $140,000 cost. Theimprovements are paid for by Ryan on July 5, 2013, and areestimated to have a useful life equal to the 21 years remaining inthe life of the building.

2.

Prepare Ryan’s year-end adjusting entries required at December 31,2013. (Do not round your intermediatecalculations.)

 

To amortize the $260,000 cost of the sublease.

Record the year end adjusting entry for the amortization expense ofthe leasehold.

Rent Expense:

Accumulated amortization leasehold:

 

To amortize the office improvements.

Record the year-end adjusting entry for the amortization expense ofthe leasehold improvements

Amortization expense leasehold improvements:

Accumulated amortization leaseholdimprovements:

Dec 31: To record rent expense

Rent Expense:

prepaid rent:



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *