Question

on january 1 of this year, diaz boutique pays $135,000 to modernize its store. improvements include new floors, ceilings, wiring, and wall coverings. these improvements are estimated to yield benefits for 10 years. diaz leases (does not own) its store and has 8 years remaining on the lease. 1. & 2. prepare the journal entry to record the cost of modernization and amortization at the end of this current year. view transaction list journal entry worksheet 1 2 record the cost of modernization of the store for $135,000 cash. note: enter debits before credits. date general journal debit credit january 01

Explanation:

Step1: Record cost of modernization

When recording the cost of modernization paid in cash, we debit the Leasehold Improvements account to show an increase in an asset and credit the Cash account to show a decrease in cash.

Date	General Journal	Debit	Credit
	Cash		$135,000

Step2: Calculate amortization

The leasehold improvements are amortized over the shorter of the useful - life of the improvements or the remaining lease term. Here, the remaining lease term of 8 years is shorter than the 10 - year useful life of the improvements. Amortization expense per year = $\frac{135000}{8}= 16875$.

Date	General Journal	Debit	Credit
	Accumulated Amortization - Leasehold Improvements		$16,875

Answer:

Date	General Journal	Debit	Credit
	Cash		$135,000
December 31	Amortization Expense - Leasehold Improvements	$16,875
	Accumulated Amortization - Leasehold Improvements		$16,875