On January 1, 2016, Holbrook Company leased a building under a three-year operat
ID: 2491752 • Letter: O
Question
On January 1, 2016, Holbrook Company leased a building under a three-year operating lease. The annual rental payments are $64,000 on January 1, 2016, the inception of the lease, and $46,000 January 1 of 2017 and 2018. Holbrook made structural modifications to the building costing $88,800 before occupying the building. The useful life of the building and the modifications is 30 years with no expected residual value.
Prepare the appropriate journal entries for Holbrook Company for 2016. Holbrook's fiscal year is the calendar year, and the company uses straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Record the entry to cash paid for prepaid rent.
Record the entry to cash paid for leasehold improvements.
Record the entry for rent expense.
Record the entry for depreciation expense.
On January 1, 2016, Holbrook Company leased a building under a three-year operating lease. The annual rental payments are $64,000 on January 1, 2016, the inception of the lease, and $46,000 January 1 of 2017 and 2018. Holbrook made structural modifications to the building costing $88,800 before occupying the building. The useful life of the building and the modifications is 30 years with no expected residual value.
Explanation / Answer
01-01-2016
(Entry for Prepaid Rent)
Prepaid rent A/c Dr 64,000
To cash A/c Cr 64,000
(Entry for leasehold improvements)-
Lease Hold Improvements A/c Dr 88,800
To Cash A/c Cr 88,800
31-12-2016
(Entry for rent expense)
Rent Expenses A/c Dr 52,000
To Prepaid Rent A/c Cr 52,000
(64,000+46,000+46,000)/3
(Entry for depreciation)
Depreciation A/c Dr 29,600
To Accumulated Depreciation A/c Cr 29,600
(88,800/3)