ACCT 304 Chapter 16 QUIZ
E21 12 Accounting for an Operating Lease On January 1 2012 Secada Co leased a building to Ryker
Inc. The relevant information related to the lease is as follows.
1. The lease arrangement is for 10 years.
2. The leased building cost $3,600,000 and was purchased for cash on January 1, 2012.
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 $220,000 per year and are made at the end of the year.
5. Property tax expense of $85,000 and insurance expense of $10,000 on the building were incurred by
Secada 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.
Instructions
(a) Prepare the journal entries that Secada Co. should make in 2012.
(b) Prepare the journal entries that Ryker Inc. should make in 2012.
(c) If Secada paid $30,000 to a real estate broker on January 1, 2012, as a fee for finding the lessee, how
much should be reported as an expense for this item in 2012 by Secada Co.?
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