Question

Long Beach, Inc., a lessor, charges Applewood Corp., a lessee, a $10,500 nonrefundable fee to enter into a five-year operating lease. The lease is effective on January 1, 2016. It provides for monthly rental of $2,400. In Applewood's income statement for the year ended June 30, 2016, rent expense should be

Answer 1

Answer:

Rent expense= $30,900

Explanation:

Non-refundable fee expense for year 2016 = $10,500 / 5

Non-refundable fee expense for year 2016 = $2,100

Annual rent expenses = Monthly rental * 12 month

Annual rent expenses = $2,400 * 12

Annual rent expenses = $28,800

Rent expense for year ended June 30, 2016 = Annual rent expense + Non-refundable fee expense for the year

Rent expense  = $28,800 + $2,100

Rent expense = $30,900