On January 1, 2008, Tenant Company leased office space from Landlord Inc. for 5 years at $75,000 per month. On that same date, Tenant made the following payments to Landlord:
The leasehold improvements include build-out costs to install office walls, restrooms, and a kitchen. Tenant allocates the cost of the leasehold improvements over the lease term using the straight-line method. What amount of total lease expense should Tenant report for the year ended 2008 and what is the balance of all of the lease related assets on December 31, 2008, assuming the lease payments are made on the first day of each month?
First month’s rent $75,000
Last month’s rent 75,000
Security deposit 100,000
Lease improvements 1,500,000
| Lease expense | Lease related assets |
| $1,200,000 | $1,375,000 |
| $1,200,000 | $1,200,000 |
| $375,000 | $1,375,000 |
