Crestfield leases office space for $6,000 per month. on january 3, the company incurs $33,000 to improve the leased office space. these improvements are expected to yield benefits for 20 years. crestfield has 10 years remaining on its lease. what journal entry would be needed to record the expense for the first year related to the improvements?

At the end of the first entry, an entry has to be recorded for the amortization of lease improvements.

Annual Amortization = Cost of improvement / Life of the improvement

= 33000 / 20

= $1,650

The journal entry would be:

Amortization expense - debit $1650

Accumulated Amortization - credit $1650

The above entry will record an expense and reduce the value of lease improvements in the balance sheet

The journal entry to record amortization during year 1:

Dr Amortization Expense account 3,300 Cr Accumulated Amortization account 3,300

Explanation:

Since Crestfield lease only lasts 10 years, the improvements must be amortized for 10 years.

amortization per year = total cost of improvements / lease time = $33,000 / 10 years = $3,300 per year

The journal entry to record amortization during year 1:

Dr Amortization Expense account 3,300 Cr Accumulated Amortization account 3,300