Question

A company has an operating lease for its office space. The lease term is 120 months and requires monthly rent of $15,000. As an incentive for the company to enter into the lease, the lessor granted the first eight months' rent at no cost. What amount of monthly rent expense should be recognized over the life of the lease?
a) $14,000
b) $14,062
c) $15,000
d) $16,072

Answer 1

Answer:

d) $16,072

Explanation:

Rent for the first eight months being 8 x 15000 = 120000 shall be shared to the remaining 112 months.

Hence $1072(120000/112) shall be added to each remaining month. Therefore a monthly rent of $16, 072(15000+1072) shall be recognized.