On November 1, 2008, Company a leased an office building for three years requiri

Question

On November 1, 2008, Company a leased an office building for three years requiring monthly rental payments of $10,500. At the time the lease was signed (November 1, 2008), they paid the building owner the following:

• First month’s rent                           $10,500

• Refundable damage deposit          $40,000

• Last month’s rent                           $10,500

                            Total                     $61,000

The entire $61,000 was charged to rent expense on 11/1/08. Payment of $10,500 was made on December1, and charged to rent expense. The rent expense to report for the year ended 12/31/08 is:

A. $10,500

B. $21,000

C. $23,805

D. $71,500

E. None of the above

Explanation / Answer

1) Answer (B) $21,000

Calculation :Since the contract was entered on NOV1st 2008 only two months rent will be covered under the current year and the Refundable damage deposit will be shown as asset in the balance sheet.

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