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Accounting for leases
On January 1, 20X9 (the lease execution date), Lessee Corp would record the following journal entries:
Dr. Prepaid rent $10,000
Cr. Cash $10,000
To record the initial lease payment due at lease inception
Dr. Cash
$50,000
Cr. Lease incentive $50,000
To record receipt of the lease incentive from the lessor.
On February 1, 20X9 (the lease commencement date), Lessee Corp would record the following journal
entries:
Dr. Right-of-use asset $900,000
Cr. Lease liability $900,000
To record the right-of-use asset and lease liability
Dr. Lease incentive $50,000
Cr. Right-of-use asset $50,000
To reclassify the lease incentive as an offset to the right-of-use asset
Dr. Right-of-use asset $10,000
Cr. Prepaid rent $10,000
To reclassify the prepaid rent as an offset to the right-of-use asset
Dr. Right-of-use asset
$1,000
Cr. Accrued expenses $1,000
To record the initial direct costs
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