Q1) On July 1, 2004, Harper Company signed contract to lease space in building for 15 years. Lease contract calls for annual (prepaid) rental payment of $80,000 on each July 1 throughout life of lease and for lessee to pay for all additions and improvements to leased property. On June 25, 2009, Harper decided to sublease space to Bosio & Assoc. for remaining 10 years of lease - Bosio pays $260,000 to Harper for right to sublease and it agrees to suppose obligation to pay the $80,000 annual rent to building owner beginning July 1, 2009. After taking possession of leased space, Bosio pays for improving office portion of leased space at a $160,000 cost. The improvements are paid for by Bosio on July 2, 2009, and are evaluated to have useful life equal to 16 years remaining in life of the building.
Required:
Create entries for Bosio to record (a) its payments to Harper for right to sublease building space (b) its payment of the 2009 annual rent to building owner, and (c) its payments for office improvements.
Create Bosio's year-end adjusting entries required at Dec 31, 2009, to (a) amortize $260,000 cost of sublease, (b) amortize office improvements, and (c) record rent expense.