Starbucks Coffee Company is a rapidly expanding retailer of specialty coffee with more than 2,600 company-operated stores in 35 states. Assume that Starbucks planned to open a new store on Commonwealth Avenue near Boston University and obtained a 20-year lease starting January 1 . 2004. The company had to renovate the facility by installing an elevator costing $175,000. Amounts spent to enhance leased property are capitalized as intangible assets called Leasehold Improvements. The elevator will be amortized over the useful life of the lease.

Required: 1. Give the journal entry to record the installation of the new elevator. 2. Give any adjusting entries required at the end of the annual accounting period on December 31, 2004, related to the new elevator. Show computations.