Question

Phoenix Agency leases office space. On January 3, Phoenix incurs $94,400 to improve the leased office space. These improvements are expected to yield benefits for 10 years. Phoenix has 8 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

Answer 1

$11,800

Step-by-step explanation:

Amount incurs to improve the office space = $94,400

Improvement expected to yield benefits = 10 years

Remaining life on its lease = 8 years

We can calculate the Expenses Recorded the First Year by using following formula:-

Amount of Expenses Recorded the First Year Related to Improvement = Amount Incurs to Improve the office Space ÷ Remaining Life on its Lease

= $94,400 ÷ 8

= $11,800