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On July 1, 2008, Falk Company signed a contract to lease space in a building for 15 years. The lease contract calls for annual (prepaid) rental payments of $100,000 on each July 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. On June 25, 2013, Falk decides to sublease the space to Ryan & Associates for the remaining 10 years of the lease-Ryan pays $240,000 to Falk for the right to sublease and it agrees to assume the obligation to pay the $100,000 annual rent to the building owner beginning July 1, 2013. After taking possession of the leased space, Ryan pays for improving the office portion of the leased space at a $150,000 cost. The improvements are paid for by Ryan on July 5, 2013, and are estimated to have a useful life equal to the 16 years remaining in the life of the building.
2.Prepare Ryan's year-end adjusting entries required at December 31, 2013. (Do not round your intermediate calculations.) (a) To amortize the $240,000 cost of the sublease.Record the year-end adjusting entry for the amortization expense of the leasehold.Dec 31Rent Expense =Accumulated amortization-Leasehold =
Dec 31(b) To amortize the office improvements.Record the year-end adjusting entry for the amortization expense of the leasehold improvements.
Amortization expense-Leasehold Improvements =Accumluated amortization - Leasehold Improvements =
Dec31(c) To record rent expenseRecord the year-end adjusting entry for the rent expense.
Rent Expense =
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