Amanda Company leased an office building for six years for an annual rent of $170,000.The lessor agreed to forgive the first year of the lease (i.e.payments would not begin until the second year).The entry in the second year would include a debit to:

Question

Quizplus · Accepted Answer

The total rent for six years is $170,000 x 6 = $1,020,000. Since the first year is free, the rent expense is spread over the remaining five years: $1,020,000 / 6 = $170,000 per year. However, the first year is free, so the expense is recognized over the remaining five years: $1,020,000 / 5 = $204,000 per year. The entry in the second year would include a debit to rent expense for $204,000, but since the question asks for the amount related to the forgiven year, the correct answer is $170,000 - $28,333 = $141,667.

Amanda Company Leased an Office Building for Six Years for an Annual