Question
On July 1, 2008, Falk Company signed a contract to lease space in a building for 15 years. The lease contract calls for annual (prepaid)
On July 1, 2008, Falk Company signed a contract to lease space in a building for 15 years. The lease contract calls for annual (prepaid) rental payments of $80,000 on each July 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. On June 25, 2013, Falk decides to sublease the space to Ryan & Associates for the remaining 10 years of the leaseRyan pays $200,000 to Falk for the right to sublease and it agrees to assume the obligation to pay the $80,000 annual rent to the building owner beginning July 1, 2013. After taking possession of the leased space, Ryan pays for improving the office portion of the leased space at a $130,000 cost. The improvements are paid for by Ryan on July 5, 2013, and are estimated to have a useful life equal to the 16 years remaining in the life of the building.
1. PREPARE ENTRY FOR RYAN TO RECORD (A) ITS PAYMENT TO FALK FOR THE RIGHT TO SUBLEASE THE BUILDING.
|
(C) ITS PAYMENT FOR THE OFFICE IMPROVEMENT.
DATE | GENERAL JOURNAL | DEBIT | CREDIT |
JULY 05 | |||
2. PREPARE RYAN'S YEAR END ADJUSTING ENTRY FOR AMORTIZATION EXPENSE OF THE LEASEHOLD.
(A) TO AMORTIZE $200,000 COST OF SUBLEASE.
DATE | GENERAL JOURNAL | DEBIT | CREDIT |
DEC 31 | |||
(B) TO AMORTIZE THE OFFICE IMPROVEMENTS.
DATE | GENERAL JOURNAL | DEBIT | CREDIT |
DEC 31 | |||
(C) TO RECORD RENT EXPENSE.
DATE | GENERAL JOURNAL | DEBIT | CREDIT |
DEC 31 | |||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started