My professor says the answer is D. But I think it should be A. On December 1, 20

Question

My professor says the answer is D. But I think it should be A.

On December 1, 2018, Goetz Corporation leased office space for 10 years at a monthly rental of $80,000. On that date Goetz paid the landlord the following amounts:

Rent deposit                                                $   80,000

First month’s rent                                             80,000

Last month’s rent                                             80,000

Installation of new walls and offices             640,000

                                                                     $880,000

The entire amount of $880,000 was charged to rent expense in 2018. What amount should Goetz have charged to expense for the year ended December 31, 2018?

A) $80,000

Explanation / Answer

B.$85,333.

installation charges $640,000 shall be written off over life of lease of 10 years.

so yearly write off will be $640,000 / 10 years

=>$64,000.

so, monthly write off will be $64,000 / 12 =>$5,333.33.

along with it the actual monthly rent of $80,000 should be expensed.

SO total expense to be charged will be = $80,000 + $5,333 =>$85,333.

december month's rent $80,000 installation charges ($640,000 / 10 years * 1 month / 12 months) $5,333.33 Goetz should have charged (rounded off) $85,333

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