Question

On January 1, 2021, Winn Heat Transfer leased office space under a three-year operating lease agreement. The arrangement specified three annual lease payments of $72,000 each, beginning December 31, 2021, and at each December 31 through 2023. The lessor, HVAC Leasing calculates lease payments based on an annual interest rate of 8%. Winn also paid a $156,000 advance payment at the beginning of the lease. With permission of the owner, Winn made structural modifications to the building before occupying the space at a cost of $228,000. The useful life of the building and the structural modifications were estimated to be 30 years with no residual value. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Required: Prepare the appropriate entries for Winn Heat Transfer from the beginning of the lease through the end of 2023. Winn's fiscal year is the calendar year. If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round your answers to nearest whole dollars.) View transaction list Journal entry worksheet 2 3 4 5 Record the beginning of the lease for Winn. Note b ore credits Date General Journal Debit Credit January 01, 2021

Answer 1

Date	Particulars	Debit ($)	Credit ($)
1 January 2021	Prepaid Rent	156000
	To Cash		156000
1 January 2021	Leasehold Improvement	228000
	To Cash		228000
31 December 2021	Rent Expense	72000
	To Cash		72000
31 December 2021	Rent expense	52000
	To Prepaid rent		52000
	(156000 X (1/3)) = 52000
31 December 2021	Depreciation	76000
	To Accumulated depreciation		76000
	(228000 X (1/3)) = 76000
31 December 2022	Rent Expense	72000
	To Cash		72000
31 December 2022	Rent Expense	52000
	To Prepaid rent		52000
31 December 2022	Depreciation	76000
	To Accumulated depreciation		76000
31 December 2023	Rent expense	72000
	To Cash		72000
31 December 2023	Rent Expense	52000
	To Prepaid rent		52000
31 December 2023	Depreciation	76000
	To Accumulated depreciation		76000