Question

Prepare a lease schedule and journal entry for leasehold improvements.

Leasehold Improvements: $142,400 (start on 1 September 2019)

Useful life: 40 years

Depreciation rate (Straight-Line): 2.5% pa.

Answer 1

Assumed that accounting year ends on December 31.

Amortization/Depreciation of leasehold improvements depends on lease term. Therefore, it is assumed as Lease term is equal to useful life of 40 years.

For 2019, amortization is calculated for 4 months only and 2059 for 8 months.

Amortization Schedule for Leasehold improvements is as follows.

Year	Op. Bal	Rate	Amortization	Cl. Bal
2019	142400.00	2.50%	1186.67	141213.33
2020	141213.33	2.50%	3560.00	137653.33
2021	137653.33	2.50%	3560.00	134093.33
2022	134093.33	2.50%	3560.00	130533.33
2023	130533.33	2.50%	3560.00	126973.33
2024	126973.33	2.50%	3560.00	123413.33
2025	123413.33	2.50%	3560.00	119853.33
2026	119853.33	2.50%	3560.00	116293.33
2027	116293.33	2.50%	3560.00	112733.33
2028	112733.33	2.50%	3560.00	109173.33
2029	109173.33	2.50%	3560.00	105613.33
2030	105613.33	2.50%	3560.00	102053.33
2031	102053.33	2.50%	3560.00	98493.33
2032	98493.33	2.50%	3560.00	94933.33
2033	94933.33	2.50%	3560.00	91373.33
2034	91373.33	2.50%	3560.00	87813.33
2035	87813.33	2.50%	3560.00	84253.33
2036	84253.33	2.50%	3560.00	80693.33
2037	80693.33	2.50%	3560.00	77133.33
2038	77133.33	2.50%	3560.00	73573.33
2039	73573.33	2.50%	3560.00	70013.33
2040	70013.33	2.50%	3560.00	66453.33
2041	66453.33	2.50%	3560.00	62893.33
2042	62893.33	2.50%	3560.00	59333.33
2043	59333.33	2.50%	3560.00	55773.33
2044	55773.33	2.50%	3560.00	52213.33
2045	52213.33	2.50%	3560.00	48653.33
2046	48653.33	2.50%	3560.00	45093.33
2047	45093.33	2.50%	3560.00	41533.33
2048	41533.33	2.50%	3560.00	37973.33
2049	37973.33	2.50%	3560.00	34413.33
2050	34413.33	2.50%	3560.00	30853.33
2051	30853.33	2.50%	3560.00	27293.33
2052	27293.33	2.50%	3560.00	23733.33
2053	23733.33	2.50%	3560.00	20173.33
2054	20173.33	2.50%	3560.00	16613.33
2055	16613.33	2.50%	3560.00	13053.33
2056	13053.33	2.50%	3560.00	9493.33
2057	9493.33	2.50%	3560.00	5933.33
2058	5933.33	2.50%	3560.00	2373.33
2059	2373.33	2.50%	2373.33	0.00

Journal Entry for Lease Hold Improvements in 2019 are as follows.

Date	Account Description	Debit	Credit
Sep 1, 2020	Leasehold Improvements	142,400
	Bank		142,400
	(Being Leasehold improvements done)
Dec 31, 2020	Amortization Expense	1,186.67
	Leasehold Improvements		1,186.67
	(Being Amortization expense recorded)

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