Question

Exercise 21-12 On January 1, 2017, Monty Co. leased a building to Flounder Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,805,000 and was purchased for cash on January 1, 2017. 3. The building is depreciated on a straight-line basis. Its estimated economic life is 50 years with no salvage value. 4. Lease payments are $267,700 per year and are made at the end of the year. 5. Property tax expense of $79,600 and insurance expense of $10,800 on the building were incurred by Monty in the first year. Payment on these two items was made at the end of the year. 6. Both the lessor and the lessee are on a calendar-year basis. (a) Prepare the journal entries that Monty Co. should make in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit (To record receipt of lease payment.) (To record depreciation.) (To record insurance and property tax.)

Answer 1

Answer
		Debit	Credit
For Monty Co.
01-01-2017	Building	$     48,05,000
	Cash		$     48,05,000
	To record building purchased
12/31/17	Cash	$       2,67,700
	Rent revenue		$       2,67,700
	To record receipt of lease payment
	Depreciation Expense(4805000/50	$          96,100
	Accumulated Depreciation		$          96,100
	Property Tax Expense	$          79,600
	Insurance Expense	$          10,800
	Cash		$          90,400
	To record insurance and property tax
	For pearl inc.
12/31/17	Rent Expense	$       2,67,700
	Cash		$       2,67,700
Expense to be reported 31800/10 = 3180
The amount paid to broker needs to capitalized and amortized over lease period
Please like ( Positive Rating )