On January 1, 2010, Stewart Co. entered into a 5-year lease on a building. The lease con...

On January 1, 2010, Stewart Co. entered into a 5-year lease on a building. The lease contract requires

(1) annual (prepaid) rental payments of $36,000 each January 1 throughout the life of the lease and (2) for

the lessee to pay for all additions and improvements to the leased property. After taking possession of the

leased space, Stewart pays for improving the office portion of the leased space at a $20,000 cost. The

improvements are paid for on January 3, 2010, and are estimated to have a useful life equal to the 13 years

remaining in the life of the building.

Required

1. Prepare entries for Stewart to record (a) its payment of the 2010 annual rent to the building owner,

and (b) its payment for the office improvements.

2. Prepare Stewart’s year-end adjusting entries required on December 31, 2010, to (a) amortize the office

improvements, and (b) record rent expense.

Check Dr. Rent Expense:

(2b) $36,000