On January 1, 2016, Holbrook Company leased a building under a three-year operat

Question

On January 1, 2016, Holbrook Company leased a building under a three-year operating lease. The annual rental payments are $64,000 on January 1, 2016, the inception of the lease, and $46,000 January 1 of 2017 and 2018. Holbrook made structural modifications to the building costing $88,800 before occupying the building. The useful life of the building and the modifications is 30 years with no expected residual value. Required: Prepare the appropriate journal entries for Holbrook Company for 2016. Holbrook's fiscal year is the calendar year, and the company uses straight-line depreciation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

All Amount In $ Date Particular Amount Dr Amount Cr Jan 1,2016 Lease rental expence A/c    Dr $52,000.00 (64000+46000+46000)/3 Deffered Asset                     Dr $12,000.00                 To Bank              A/c $64,000 Jan 1,2016 Building           A/c                Dr $88,800.00                 To Bank               A/c                 $88,800.00 Dc 31,2016 Depriciation     A/c                 Dr $2,960.00                 To    Building         A/c $2,960.00 * calculation of depriciation $88800/30 years = $2,960.00

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