40 Crestfield leases office space for $6,000 per month. On January 3, the compan

Question

40

Crestfield leases office space for $6,000 per month. On January 3, the company incurs $25,000 to improve the leased office space. These improvements are expected to yield benefits for 4 years. Crestfield has 2 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?

Debit Amortization Expense $6,250; credit Accumulated Amortization $6,250.

Debit Depletion Expense $12,500; credit Accumulated Depletion $12,500.

Debit Depreciation Expense $6,250; credit Accumulated Depreciation $6,250.

Debit Depletion Expense $25,000; credit Accumulated Depletion $25,000.

Debit Amortization Expense $12,500; credit Accumulated Amortization $12,500.

Crestfield leases office space for $6,000 per month. On January 3, the company incurs $25,000 to improve the leased office space. These improvements are expected to yield benefits for 4 years. Crestfield has 2 years remaining on its lease. What journal entry would be needed to record the expense for the first year related to the improvements?

Explanation / Answer

Answer. Debit Amortization Expense $12,500; credit Accumulated Amortization $12,500. Total expenses to amortized = $25000 Expected Life = 4 year Remaining Life of Lease = 2 Year Amt. to be Amortized in 2 year (Life of the lease) Amt to be amortized = 25000/2 years= $12500

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