Prepare journal entrieson the lease and sublease detailson

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Reference no: EM13356176

Prepare Journal entrieson the lease and sublease details

On July 1, 2004, Harper Company signed a contract to lease space in a building for 15 years. The lease contract calls for annual (prepaid) rental payment of $80,000 on each July 1 throughout the life of the lease and for the lessee to pay for all additions and improvements to the leased property. On June 25, 2009, Harper decided to sublease the space to Bosio & Assoc. for the remaining 10 years of the lease - Bosio pays $260,000 to Harper for the right to sublease and it agrees to assume the obligation to pay the $80,000 annual rent to the building owner beginning July 1, 2009. After taking possession of the leased space, Bosio pays for improving the office portion of the leased space at a $160,000 cost. The improvements are paid for by Bosio on July 2, 2009, and are estimated to have a useful life equal to the 16 years remaining in the life of the building.

Required:

Prepare entries for Bosio to record (a) its payments to Harper for the right to sublease the building space (b) its payment of the 2009 annual rent to the building owner, and (c) its payments for the office improvements.

Prepare Bosio's year-end adjusting entries required at Dec 31, 2009, to (a) amortize the $260,000 cost of the sublease, (b) amortize the office improvements, and (c) record rent expense.

Reference no: EM13356176

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