On January 1, 2020, Neptune Inc. leased a building to Saturn Corp. for a ten-year term at an annual rental of $200,000. At inception of the lease, Neptune received $800,000, which covered the first two years rent of $400,000 and a security deposit of $400,000. This deposit will not be returned to Saturn upon expiration of the lease, but will be applied to payment of rent for the last two years of the lease. What portion of the $800,000 should be shown as a current and long-term liability in Neptune's December 31, 2020 statement of financial position? $$\begin{array} { c c c }
& \text { Current Liability } & \text { Lone-term Liability } \
\text { a) } & \$ 0 & \$ 800,000 \
\text { b) } & \$ 200,000 & \$ 400,000 \
\text { c) } & \$ 400,000 & \$ 400,000 \
\text { d) } & \$ 400,000 & \$ 200,000
\end{array}$$

Question

On January 1, 2020, Neptune Inc. leased a building to Saturn Corp. for a ten-year term at an annual rental of $200,000. At inception of the lease, Neptune received $800,000, which covered the first two years rent of $400,000 and a security deposit of $400,000. This deposit will not be returned to Saturn upon expiration of the lease, but will be applied to payment of rent for the last two years of the lease. What portion of the $800,000 should be shown as a current and long-term liability in Neptune's December 31, 2020 statement of financial position? $$\begin{array} { c c c } 
& \text { Current Liability } & \text { Lone-term Liability } \
\text { a) } & \$ 0 & \$ 800,000 \
\text { b) } & \$ 200,000 & \$ 400,000 \
\text { c) } & \$ 400,000 & \$ 400,000 \
\text { d) } & \$ 400,000 & \$ 200,000
\end{array}$$

Quizplus · Accepted Answer

The Answer of On January 1, 2020, Neptune Inc. leased a building to Saturn Corp. for a ten-year term at an annual rental of $200,000. At inception of the lease, Neptune received $800,000, which covered the first two years rent of $400,000 and a security deposit of $400,000. This deposit will not be returned to Saturn upon expiration of the lease, but will be applied to payment of rent for the last two years of the lease. What portion of the $800,000 should be shown as a current and long-term liability in Neptune's December 31, 2020 statement of financial position? $$\begin{array} { c c c } 
& \text { Current Liability } & \text { Lone-term Liability } \
\text { a) } & \$ 0 & \$ 800,000 \
\text { b) } & \$ 200,000 & \$ 400,000 \
\text { c) } & \$ 400,000 & \$ 400,000 \
\text { d) } & \$ 400,000 & \$ 200,000
\end{array}$$