[Natalierose]

Hey guys I’m stuck on this Becker question for FAR

January 1 Glen co leased a building to dix corp for 10 years w/ annual rental of $50,000. At inception Glen received $200,000 covering the first 2 years’ rent of $100,000 and a deposit of $100,000. The deposit will not be refunded and will instead be applied to the final 2 years of rent.

What portion of the $200,000 should be shown as a current and long term liability in Glen’s December 31, Year 1 Balance sheet?

My answer:

$50,000 current liability- (the year 1 rent prepaid at 1/1 year 1)
$150,000 long term liability (the year 2 rent prepaid at 1/1 year 1 and the $100k deposit which won’t be utilized til years 9/10)

Becker says the answer is
$50,000 current (” Payment of $100,000 covering year 1 and 2 rental income”) and $100,000 long term (deposit)

Any input?

REG- Passed
BEC- Passed
AUD -Failed - Retake in October
FAR- Scheduled 8/1/2016

[CPYay]

Picture it as two liabilities.

$100K for Yr 1/Yr 2, or $50K each.

$100K for Yr 9/Yr 10, or $50K each.

At 12/31, end of Yr 1, you've used $50K of the first $100K. Thus, $50K remains as a current liability (used within 1 yr), whereas the $100K for Yr 9 and Yr 10 will be long-term.

[Natalierose]

Ahhhh because by the end of the year the year 1 is used- and only the year 2 pre-payment remains *face palm*

I've been cramming and this just wouldn't click lol THANK YOU

REG- Passed
BEC- Passed
AUD -Failed - Retake in October
FAR- Scheduled 8/1/2016

[Author]

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