On January 1, 2016, Sweetwater Furniture Company leased office space under a 21-

Question

On January 1, 2016, Sweetwater Furniture Company leased office space under a 21-year operating lease agreement. The contract calls for annual rent payments on December 31 of each year. The payments are $10,000 the first year and increase by $500 per year. Benefits expected from using the office space are expected to remain constant over the lease term. Required: Record Sweetwater's rent payment at December 31, 2020 (the fifth rent payment) and December 31, 2030 (the 15th rent payment). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Journal entry on December 31, 2020

Rent expenses Account debit 12,000

to rent payable 12,000

Journal entry on December 31, 2030

Rent expenses Account debit 17,000

to rent payable 17,000

Year Rent expenses 31-Dec-16                     10,000 31-Dec-17                     10,500 31-Dec-18                     11,000 31-Dec-19                     11,500 31-Dec-20                     12,000 31-Dec-21                     12,500 31-Dec-22                     13,000 31-Dec-23                     13,500 31-Dec-24                     14,000 31-Dec-25                     14,500 31-Dec-26                     15,000 31-Dec-27                     15,500 31-Dec-28                     16,000 31-Dec-29                     16,500 31-Dec-30                     17,000

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