On December 1, 2015, Clark Co. leased office space for five years at a monthly r

Question

On December 1, 2015, Clark Co. leased office space for five years at a monthly rental of $70,000. On the same date, Clark paid the lessor the following amounts:

First month's rent $ 70,000

Last month's rent 70,000

Security deposit (refundable at lease expiration) 90,000

Installation of new walls and offices 420,000

Required: What should be Clark's 2015 expense relating to utilization of the office space?

Howe Co. leased equipment to Kew Corp. on January 2, year 1, for an eight-year period expiring December 31, year 8. Equal payments under the lease are $682,000 and are due on January 2 of each year. The first payment was made on January 2, year 1. The list selling price of the equipment is $4,000,000 and its carrying cost on Howe's books is $3,180,000. The lease is appropriately accounted for as a sales-type lease. The present value of the lease payments is $3,750,000.

Required: What amount of profit on the sale should Howe report for the year ended December 31, year 1?

Explanation / Answer

01st Question

Expenses to accounted for Accounting Yr 01st Jan 15 to 31st Dec 15 Lease Period 5 yrs w.e.f. 01st Dec 15 Spent $ Exps USD $ Explanation for accounting method adopted First Month Rent 70000 70000 Being mothly rental to be accounted in yr Last month Rent 70000 0 being advance rental to be accounted at the end of lease period Refundable Security Deposit at the end of lease perioid 90000 0 being refundable deposit same is to be shown as lease advance Installation of new walls and offices to be amortised for 5 yrs 420000 84000 Since this capital expenditure same to be deprecited over lease period

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