On January 1, 2016, Holbrook Company leased a building under a three-year operat
ID: 2568000 • 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.)
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
Prepaid rent Dr 64000
Cr cash 64000
Lease hold improvements Dr 88,800
Cr cash 88,800
dec31 2016
Rent expense Dr 52000
Cr prepaid rent 52000
(64000 + 46000 + 46000) / 3
Depreciation expense Dr 29600
Cr accumulated depreciation 29600
(88800 / 3)