On December 1, 2015, Goetz Corporation leased office space for 10 years at a monthly rental of $90,000. On that date Goetz paid the landlord the following amounts: $$\begin{array} { l r }
\text { Rent deposit } & \$ 90,000 \
\text { First month's rent } & 90,000 \
\text { Last month's rent } & 90,000 \
\text { Installation of new walls and offices } & 720,000 \
& \$ 990,000
\end{array}$$ The entire amount of $990,000 was charged to rent expense in 2015. What amount should Goetz have charged to expense for the year ended December 31, 2015?
A) $90,000
B) $96,000
C) $186,000
D) $720,000

Question

On December 1, 2015, Goetz Corporation leased office space for 10 years at a monthly rental of $90,000. On that date Goetz paid the landlord the following amounts: $$\begin{array} { l r } 
\text { Rent deposit } & \$ 90,000 \
\text { First month's rent } & 90,000 \
\text { Last month's rent } & 90,000 \
\text { Installation of new walls and offices } & 720,000 \
& \$ 990,000
\end{array}$$ The entire amount of $990,000 was charged to rent expense in 2015. What amount should Goetz have charged to expense for the year ended December 31, 2015?
A) $90,000
B) $96,000
C) $186,000
D) $720,000

Quizplus · Accepted Answer

The correct expense for the year ended December 31, 2015, should include the first month's rent of $90,000 and the amortization of the installation costs ($720,000) over the 10-year lease term, which is $72,000 per year ($720,000 / 10 years). Therefore, the total expense for 2015 should be $90,000 (first month's rent) + $72,000 (amortization of installation costs) = $162,000. However, since none of the provided options matches this calculation, it seems there might be a misunderstanding in the interpretation of the options or a mistake in the calculation. The correct approach to calculate the expense for the year would indeed involve both the rent for the first month and the amortization of the installation costs, but given the options provided, a reevaluation of the answer is necessary.

On December 1, 2015, Goetz Corporation Leased Office Space for 10