Pinky Enterprises entered into a real estate lease agreement for a new building on March 1, 2023. The lease is anoperating lease and is fully executed on that day. Recognizing that it will take a few months for business to be infull swing, Pinky was able to negotiable for 6 months of free rent before rent payments will commence.Accordingly, the terms of the lease require Pinky to make 54 consecutive payments of $24,600 per monthbeginning on September 1, 2023. The lease term spans five years. Pinky's financial year-end is December 31,2023. What amount will Pinky record as its lease expense with respect to this building for the year endedDecember 31, 2023?a. $221,400O b. $199,260O c. $98,400O d. $246,000

Lease expense refers to the cost incurred by a lessee for renting an asset through a lease…

Answered: Pinky Enterprises entered into a real…

Pinky Enterprises entered into a real estate lease agreement fo operating lease and is fully executed on that day. Recognizing full swing, Pinky was able to negotiable for 6 months of free r

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Leasing

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

Question

Pinky Enterprises entered into a real estate lease agreement for a new building on March 1, 2023. The lease is an
operating lease and is fully executed on that day. Recognizing that it will take a few months for business to be in
full swing, Pinky was able to negotiable for 6 months of free rent before rent payments will commence.
Accordingly, the terms of the lease require Pinky to make 54 consecutive payments of $24,600 per month
beginning on September 1, 2023. The lease term spans five years. Pinky's financial year-end is December 31,
2023. What amount will Pinky record as its lease expense with respect to this building for the year ended
December 31, 2023?
a. $221,400
O b. $199,260
O c. $98,400
O d. $246,000

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