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
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 10, Problem 8BPSB
Requirement 1

To determine

To prepare:

Journal entries for Stewart for −

  1. Payment to Mason 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 8BPSB

Solution:

The requirement journal entries are −


    Accounts Titles and DescriptionsDebitCredit
    a.
    Leasehold
    40,000


    Cash

    40,000

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






    b.
    Prepaid Rent
    36,000


    Cash

    36,000

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






    c.
    Leasehold Improvements
    20,000


    Cash

    20,000

    (To record cost of leasehold improvements for $ 20,000)


Explanation of Solution

The above journal entries can be explained as under −

  • The leasehold is debited with the amount $ 40,000 as it is paid for the right to sublease the building space. The cash is credited with $ 40,000.
  • 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 $ 36,000.
  • The leasehold improvements are incurred and thus recorded with $ 20,000 and the cash is credited with $ 20,000
  • Conclusion

    Thus, the journal entries for Stewart for payment to Mason 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 $ 40,000 cost of the sublease
    2. To amortize the office improvement
    3. To record rent expense

    Requirement 2

    Expert Solution
    Check Mark

    Answer to Problem 8BPSB

    Solution:

    The required adjusting journal entries are −


      Accounts Titles and DescriptionsDebitCredit
      a.
      Rent Expense
      8,000


      Accumulated amortization - Leasehold

      8,000

      (To record amortization of $ 40,000 cost of sublease)






      b.
      Amortization expense - Leasehold Improvements
      4,000


      Accumulated amortization - Leasehold Improvements

      4,000

      (To record amortization of leasehold improvements)






      c.
      Rent Expense
      36,000


      Prepaid Rent

      36,000

      (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 = $ 40,000
      • Remaining life of lease = 5 years
      • Months expired in 2015 = 12 months (i.e. from January 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 = ( $ 40,000 years   ) X (  12 months  12 months )Amortized amount = $ 8,000

      The rent expense will be debited with $ 8,000 and Accumulated amortization − Leasehold will be credited with $ 8,000

      1. 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.
      2. Given,
        • Amount paid for office improvement = $ 20,000
        • Remaining life of lease = 5 years
        • Months expired in 2015 = 12 months (i.e. from January 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 = ( $ 20,000 years   ) X (  12 months  12 months )Amortized amount = $ 4,000

        The Amortization expense - Leasehold Improvements will be debited with $ 4,000 and Accumulated amortization - Leasehold Improvements will be credited with $ 4,000.

      3. Now, the rent expense will be calculated as −
      4. Given,
        • Prepaid Rent = $ 36,000
        • Months expired in 2015 =12 months (i.e. from January to December)

        •   Rent Expense = Prepaid Rent X (  12 months  12 months)Rent Expense = $ 36,000

        The rent expense will be debited with $ 36,000 and prepaid rent will be credited with $ 36,000.

    Conclusion

    Thus, the adjusting journal entries to amortize the $ 40,000 cost of the sublease, to amortize the office improvement and to record rent expense have been prepared

    Want to see more full solutions like this?

    Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
    Students have asked these similar questions
    In the variable costing period's income statement, where should the period's fixed costs be included? a) The income statement allows for the allocation of the fixed expenses into the inventory value. b) The variable cost, as well as the fixed expenses, are included in the cost of goods sold. c) In variable costing, you do not include the fixed costs in the income statement. d) The fixed costs are expensed as period costs and not included in the value of the inventory.
    Jonathan is married, files a joint return, and has one child. During 2011, Jonathan has $85,000 of taxable income. He has $20,000 of positive AMT adjustments and $28,000 of tax preferences. Since Jonathan rents his home (pays no mortgage interest) and lives in Tennessee (has no state income tax), he does not itemize his deductions but takes the standard deduction. Calculate Jonathan's AMTI (before exclusion amount). a. $133,000 b. $144,100 c. $144,600 d. $155,700
    Calculate the net income for the firm. General accounting

    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
    Knowledge Booster
    Background pattern image
    Accounting
    Learn more about
    Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
    Similar questions
    SEE MORE QUESTIONS
    Recommended textbooks for you
    Text book image
    FINANCIAL ACCOUNTING
    Accounting
    ISBN:9781259964947
    Author:Libby
    Publisher:MCG
    Text book image
    Accounting
    Accounting
    ISBN:9781337272094
    Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
    Publisher:Cengage Learning,
    Text book image
    Accounting Information Systems
    Accounting
    ISBN:9781337619202
    Author:Hall, James A.
    Publisher:Cengage Learning,
    Text book image
    Horngren's Cost Accounting: A Managerial Emphasis...
    Accounting
    ISBN:9780134475585
    Author:Srikant M. Datar, Madhav V. Rajan
    Publisher:PEARSON
    Text book image
    Intermediate Accounting
    Accounting
    ISBN:9781259722660
    Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
    Publisher:McGraw-Hill Education
    Text book image
    Financial and Managerial Accounting
    Accounting
    ISBN:9781259726705
    Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
    Publisher:McGraw-Hill Education
    Accounting for Finance and Operating Leases | U.S. GAAP CPA Exams; Author: Maxwell CPA Review;https://www.youtube.com/watch?v=iMSaxzIqH9s;License: Standard Youtube License