On January 4, 2016, Koller Co. leased a building to Delta Corp. for a ten-year t
ID: 2471583 • Letter: O
Question
On January 4, 2016, Koller Co. leased a building to Delta Corp. for a ten-year term at an annual rental of $200,000. At inception of the lease, Koller received $800,000 covering the first three years' rent of $600,000 and a security deposit of $200,000. This deposit will not be returned to Delta upon expiration of the lease but will be applied to payment of rent for the last year of the lease. What portion of the $800,000 should be shown as a current and long-term liability in Koller's December 31, 2016 balance sheet?
Current Liability Long-term Liability
$200,000 $200,000
$400,000 $200,000
$200,000 $600,000
$200,000 $400,000
$200,000 $200,000
$400,000 $200,000
$200,000 $600,000
$200,000 $400,000
Explanation / Answer
Solution:
The amount of $ 800,000 to be distributed as current and long term liability as under -
Out of $ 800,000 - $ 200,000 is current year's rent and $ 400,000 rent for next two years and $ 200,000 for last year are long term liability.
Therefore, the answer to the above question is -
$ 200,000 - Current Liability and $ 600,000 long term liability.
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