Phoenix Agency Office Space Improvement Expense Calculation
How much expense should be recorded the first year related to the improvements Phoenix Agency made to the leased office space?
a. $8,125
b. $13,000
c. $6,000
d. $65,000
e. $20,000
Answer: $13,200
The cost incurred will have to be recognised over the entire useful period at an equal rate.
The useful period is the lease period which is 8 years.
First year expense = $105,600 / 8
= $13,200