Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077862275
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 10, Problem 8APSA
Requirement 1

To determine

To prepare:

Journal entries for Ryan for −

  1. Payment to Falk for the right to sublease the building space
  2. Its payment of the 2015 annual rent
  3. Its payment for the office improvements

Requirement 1

Expert Solution
Check Mark

Answer to Problem 8APSA

Solution:

The requirement journal entries are −


    Accounts Titles and DescriptionsDebitCredit
    a.
    Leasehold
    200,000


    Cash

    200,000

    (To record the payment paid for sublease of the building space)






    b.
    Prepaid Rent
    80,000


    Cash

    80,000

    (To record the rent paid in advance for the year)






    c.
    Leasehold Improvements
    130,000


    Cash

    130,000

    (To record cost of leasehold improvements for $ 130,000)


Explanation of Solution

The above journal entries can be explained as under −

  1. The leasehold is debited with the amount $ 200,000 as it is paid for the right to sublease the building space. The cash is credited with $ 200,000.
  2. The rent is paid for the full year. Since, it is paid in advance for the whole year, thus, prepaid rent account is debited and the cash is credited for $ 80,000.
  3. The leasehold improvements are incurred and thus recorded with $ 130,000 and the cash is credited with $ 135,000

Conclusion

Thus, the journal entries for Ryan for payment to Falk for the right to sublease the building space, its payment of the 2015 annual rent and its payment for the office improvements have been prepared.

Requirement 2

To determine

To prepare:

Adjusting journal entries to −

  1. To amortize the $ 200,000 cost of the sublease
  2. To amortize the office improvement
  3. To record rent expense

Requirement 2

Expert Solution
Check Mark

Answer to Problem 8APSA

Solution:

The required adjusting journal entries are −


    Accounts Titles and DescriptionsDebitCredit
    a.
    Rent Expense
    10,000


    Accumulated amortization - Leasehold

    10,000

    (To record amortization of $ 200,000 cost of sublease)






    b.
    Amortization expense - Leasehold Improvements
    6,500


    Accumulated amortization - Leasehold Improvements

    6,500

    (To record amortization of leasehold improvements)






    c.
    Rent Expense
    40,000


    Prepaid Rent

    40,000

    (To record adjustment entry for rent expense)


Explanation of Solution

The above journal entries can be explained as under −

  1. The amount paid for the right to sublease will be amortized using the remaining life of the asset and the months expired in the year 2015.
  2. Given,
    • Amount paid for the right to sublease = $ 200,000
    • Remaining life of lease = 10 years
    • Months expired in 2015 = 6 months (i.e. from July to December)
    • The amount to be amortized will be calculated as −

        Amortized amount = ( Amount paid  Remaining life of lease ) X ( Months expired in 2015 12 months )Amortized amount = ( $ 200,000 10 years   ) X (  6 months  12 months )Amortized amount = $ 10,000

    The rent expense will be debited with $ 10,000 and Accumulated amortization − Leasehold will be credited with $ 10,000

  3. The amount paid for the office improvement will be amortized using the remaining life of the asset and the months expired in the year 2015.
  4. Given,
    • Amount paid for office improvement = $ 130,000
    • Remaining life of lease = 10 years
    • Months expired in 2015 = 6 months (i.e. from July to December)
    • The amount to be amortized will be calculated as −

        Amortized amount = ( Amount paid  Remaining life of lease ) X ( Months expired in 2015 12 months )Amortized amount = ( $ 130,000 10 years   ) X (  6 months  12 months )Amortized amount = $ 6,500

    The Amortization expense - Leasehold Improvements will be debited with $ 6,500 and Accumulated amortization - Leasehold Improvements will be credited with $ 6,500

  5. Now, the rent expense will be calculated as −
  6. Given,
    • Prepaid Rent = $ 80,000
    • Months expired in 2015 = 6 months (i.e. from July to December)

    •   Rent Expense = Prepaid Rent X (  6 months  12 months)Rent Expense = $ 40,000

    The rent expense will be debited with $ 40,000 and prepaid rent will be credited with $ 40,000.

Conclusion

Thus, the adjusting journal entries to amortize the $ 200,000 cost of the sublease, to amortize the office improvement and to record rent expense have been prepared

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Chapter 10 Solutions

Fundamental Accounting Principles -Hardcover

Ch. 10 - Prob. 11DQCh. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Prob. 16DQCh. 10 - Prob. 17DQCh. 10 - Prob. 18DQCh. 10 - Prob. 19DQCh. 10 - Prob. 20DQCh. 10 - Prob. 21DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - On January 2,2015. the Matthews Band acquires...Ch. 10 - Units-of-production On January 2,2015. the...Ch. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QSCh. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Exercise 10-5 Units-of-production depreciation P1...Ch. 10 - Exercise 10-6 Double-declining-balance...Ch. 10 - Prob. 7ECh. 10 - Exercise 10-8 Double-declining-balance...Ch. 10 - Prob. 9ECh. 10 - Exercise 10-10 Double-declining-balance...Ch. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Prob. 20ECh. 10 - Prob. 21ECh. 10 - Prob. 22ECh. 10 - Prob. 23ECh. 10 - Prob. 24ECh. 10 - Prob. 25ECh. 10 - Prob. 1APSACh. 10 - Problem 1O-2A Depreciation methods P1 A machine...Ch. 10 - Prob. 3APSACh. 10 - Prob. 4APSACh. 10 - Prob. 5APSACh. 10 - Prob. 6APSACh. 10 - Problem 1O7A Natural resources P3 On July 23 of...Ch. 10 - Prob. 8APSACh. 10 - Prob. 1BPSBCh. 10 - Problem 10-28 Depreciation methods P1 On January...Ch. 10 - Prob. 3BPSBCh. 10 - Prob. 4BPSBCh. 10 - Prob. 5BPSBCh. 10 - Problem 1O-6B Disposal of plant assets C1 P1 P2 On...Ch. 10 - Problem 10-78 Natural resources P3 On February 19...Ch. 10 - Prob. 8BPSBCh. 10 - Prob. 10SPCh. 10 - Refer to the financial statements of Apple in...Ch. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTNCh. 10 - Prob. 5BTNCh. 10 - Each ream member is to become an expert on one...Ch. 10 - Prob. 7BTNCh. 10 - Prob. 8BTNCh. 10 - Prob. 9BTN
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