
Straight-line Expense Recognition of Leases - nolawv
http://www.hhcpa.com/blogs/audit-accounting/straight-line-expense-recognition-of-leases/
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nolawv
I came across this discussion and finds it very helpful. I do have some
questions as I am working on similar leases with yearly rent increases and
lease incentives.

The situation is: The 1st six months are free, the 7th to 12th month, there is
a partial rent abatement. We also receive moving and tenant improvement
allowances.

Lease is for 7 years and I straight lined lease expense over the life of the
lease. Monthly lease expense excluding Amortized lease incentive is $35,640.

Minimum lease payment in year 1 is $38,800 Total lease incentive approx.
$271,000 which is amortized over the life of the lease and equals To $2,988
per month.

Since my 1st 6 months are free, what would be my entry in the first 6 months?
Also, would my recurring entry be:

Dr. Rent expense $35,640 Dr. Deferred asset/lease Incentive $2,988 Dr.
Deferred asset. $672 ( excess payment over expense) Cr cash. $38,800

To record the incentive: Dr. Other receivable. $271k Dr. ST/ LT deferred
liability $271k

I need your help to get some perspective on these entries.

Tnx

