On January 1, 2016, Rossi Company leased a building under a three-year operating
ID: 2461267 • Letter: O
Question
On January 1, 2016, Rossi Company leased a building under a three-year operating lease. The annual rental payments are $68,000 beginning on January 1, 2016, the inception of the lease, and $50,000 January 1 of 2017 and 2018. Rossi made modifications to the building costing $90,000 before occupying the building. The useful life of the building and the modifications is 30 years with no expected residual value.
Required:
Prepare the appropriate journal entries for Rossi Company for 2016. Rossi’s fiscal year is the calendar year, and Rossi uses straight-line depreciation.
Explanation / Answer
01.01.2016
Bank a/c Dr. 68000
To Lease rent a/c 68000
(accrual of lease rent income for the year 2016)
01.01.2016
Building a/c Dr. 90000
to Bank a/c 90000
(Modification in bulding )
31.12.2016
Depreciation a/c Dr 3000
To Building a/c 3000
(Depreciation on modification)
Depreciation of bulding has not been calculated since cost is not available.