question archive On January 1, 20x1, Lessor leased office space to Lessee

On January 1, 20x1, Lessor leased office space to Lessee

Subject:AccountingPrice:2.84 Bought3

On January 1, 20x1, Lessor leased office space to Lessee. Payments on the lease will be made as follows:
Year                                       Rental payment
Dec 31, 20x1 200,000
Dec. 31, 20x2 240,000
Dec 31, 20x3 260,000

As an inducement to enter to the lease, Lessor granted Lessee the first six months of the lease as rent-free.
Additional rent (contingent rent) of 10% is to be paid for any excess of sales of Lessee over P2, 000,000. Lessee's sales for 20x1. 20x2, and 20x3 are P1,800,000, P2,000,000, and P3,000,000, respectively.

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Date

Particulars

Debit

Credit

Dec 31, 20x1

Cash

$100,000

Accounts receivable ($200,000 - $100,000)

$100,000

Rent revenue

$200,000

Annual revenue = (Total payments - Discount) * 1/3

Annual revenue = [700,000 - (200,000 * 6/12)] * 1/3 = 200,000

Dec 31, 20x2

Cash

$240,000

Accounts receivable ($240,000 - $200,000)

$40,000

Rent revenue

$200,000

Dec 31, 20x3

Cash

$260,000

Accounts receivable ($260,000 - $200,000)

$60,000

Rent revenue

$200,000

Cash (($3000,000-$2000,000) x10%)

$100,000

Rent revenue

$100,000