Question

On January 4, 2019, Kiley Co. leased a building to Dodd Corp. for a ten-year term at an annual rental of $200,000. At the beginning of the lease, Kiley received $800,000 covering the first two years' rent of $400,000 and a security deposit of $400,000. This deposit will not be returned to Dodd upon expiration of the lease but will be applied to payment of rent for the last two years of the lease.What portion of the $800,000 should be shown as a current and long-term liability in Kiley's December 31, 2019 balance sheet? Current Liability Long-term Liabilitya. $0 $800,000b. $200,000 $400,000c. $400,000 $400,000d. $400,000 $200,000

Answer 1

b. $200,000 $400,000

Step-by-step explanation:

As it given that $800,000 received by Kiley, out of which $400,000 is the security deposit amount and remaining $400,000 represents the current year and the next year rent

So we assume $200,000 is the current year rent revenue and the other $200,000 represents the unearned rent revenue which is reflected as a current liability

And, the security amount is shown as a long term liability