1. On January 1, 2010, Beyer Co. leased a building to Heins Corp. for a ten-year
ID: 2435910 • Letter: 1
Question
1. On January 1, 2010, Beyer Co. leased a building to Heins Corp. for a ten-year term at an annual rental of $80,000. At inception of the lease, Beyer received $320,000 covering the first two years' rent of $160,000 and a security deposit of $160,000. This deposit will not be returned to Heins 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 $320,000 should be shown as a current and long-term liability, respectively, in Beyer's December 31, 2010 balance sheet?Current Liability Long-term Liability
a. $0 $320,000
b. $80,000 $160,000
c. $160,000 $160,000
d. $160,000 $80,000
Explanation / Answer
b) The second year's rent of 80,000 should be shown as a current liability (due in 1 year) and the deposit as a long term liability.
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