LEASEHOLD AMORTIZATION. The public accounting firm of Blackwell and Medford recently moved into a suite of offices in a new building. The lease required a payment of $75,000 in advance and monthly rental payments of $10,000. The lease has a term of 10 years and is renewable for another 10 years with another advance payment, of $100,000. Monthly rental payments for the renewal will be based on the consumer price index at the time the lease is renewed.

REQUIRED:

1. Compute the rent expense for Blackwell and Medford for a full year’s use of its new office.

2. Prepare the journal entry to record the amortization of the leasehold at the end of the first year’s use of the new office.

3. Indicate how the leasehold would appear in the Blackwell and Medford balance sheet at the end of the first year.