Phoenix Agency Office Space Improvement Expense Calculation

How much expense should be recorded the first year related to the improvements Phoenix Agency made to the leased office space?

a. $8,125

b. $13,000

c. $6,000

d. $65,000

e. $20,000

Answer: $13,200

The cost incurred will have to be recognised over the entire useful period at an equal rate.

The useful period is the lease period which is 8 years.

First year expense = $105,600 / 8