nt CALCULATOR FULL SCREEN PRINTER VERSIONBACXI NEXT Exercise 21-12 On January 1,
ID: 2337595 • Letter: N
Question
nt CALCULATOR FULL SCREEN PRINTER VERSIONBACXI NEXT Exercise 21-12 On January 1, 2017, Wildharse Co. leased a building to Sheffield Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,320,000 and was purchased for cash on January 1, 2017. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are S257,900 per year and are made at the end of the year. 5. Property tax expense of $79,100 and insurance expense of $9,700 on the building were incurred by Wildhorse in the first year. Payment on these two items was made at the end of the year. 6. Both the lessor and the lessee are on a calendar-year basis. (a) Prepare the journal entries that Wildhorse Co. should make in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit (To record receipt of lease payment.)Explanation / Answer
a) Wildhorse books of accounts
Date
Accounts title
Dr
Cr
1/1/17
Building
4320000
To cash
4320000
[Being cost of building recorded]
Cash
257000
To unearned rent revenue
257000
[Being receipt of lease recorded]
12/31/17
unearned rent revenue
257000
To Rent revenue
257000
Depreciation expense [4320000 / 50 years]
86400
To Accumulated depreciation - building
86400
b. Sheffields books of accounts
Date
Accounts title
Dr
Cr
1/1/17
Rent expense
257000
To cash
257000
c. Right of use assets = 4320000 + $28500
= $4348500
Date
Accounts title
Dr
Cr
1/1/17
Building
4320000
To cash
4320000
[Being cost of building recorded]
Cash
257000
To unearned rent revenue
257000
[Being receipt of lease recorded]
12/31/17
unearned rent revenue
257000
To Rent revenue
257000
Depreciation expense [4320000 / 50 years]
86400
To Accumulated depreciation - building
86400
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