Question

On January 1, 2017, Whispering Co. leased a building to Metlock Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,320,000 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 $257,900 per year and are made at the end of the year. 5. Property tax expense of $79,100 and insurance expense of $9,700 on the building were incurred by Whispering 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 Whispering 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.)

Answer 1

ANSWER

As per the given question,

Journal entry in the books of Whispering co.
Date	Particulars			Debit	Credit
01-01-2017	Building			4320000
	cash				4320000
	(to record purchase of building)
12/31/17	Cash			257900
	Rent revenue				257900
	(to record receipt of payment)
	Depreciation expenses(4320000/50)			86400
	accumulated depreciation-building				86400
	(to record depreciation)
	Property tax expenses			79100
	Insurance expenses			9700
	Cash				88800
	(to record insurance & property tax)
b)	In the books of Metlock Inc
12/31/17	Rent expenses			257900
	Cash				257900
	(to record payment of rent exp)
c) If whispering Paid $28500 to a real estate broker on january 1 2017
Expenses should be reported = 28500/10 = 2850

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