RE: [taxchat] additional buildout

Thanks Debbie.  That is what I assumed was correct in my mind, so I appreciate your opinion.

 

Debbie Wilson

 

From: taxchat@yahoogroups.com [mailto:taxchat@yahoogroups.com] On Behalf Of Debbie Breedlove
Sent: Wednesday, October 29, 2008 4:30 PM
To: taxchat@yahoogroups.com
Subject: Re: [taxchat] additional buildout

 

Debit $100,000 to Leasehold Improvements (to be amortized)

Credit $100,000 to Note Payable

 

Figure out what the effective interest rate is when paying $20,000 in interest on $100,000 over 5 years.  Prepare an amortization schedule, and allocate the $2,000 to principal and interest each month according to the amortization schedule.

 

I don't know if that's what you have to do, but that's what I would do.

 

 

From: Debbie Wilson

Sent: Wednesday, October 29, 2008 9:27 AM

To: 'TaxTalk Listserv Members'

Cc: taxchat@yahoogroups.com

Subject: [taxchat] additional buildout

 

My large franchise account has just signed a lease and in that lease is a section called “additional buildout rental amount payment”.  The owner of the building paid part of the leasehold improvements, $100,000.00, that my client will  have to pay back to the owner over the five years of the lease.  They are tacking $2000.00 additional on to the rent payment each month so will actually pay back $120,000.00.  I’m not sure how to record this.  Is it additional rent or do I have to record it as a loan with the $20,000.00 spread over the 5 years and capitalize the $100,000.00.  any help would be appreciated.

Sincerely,

Debbie Wilson EA

Preferred Accounting

420 E Beloit St.

Darien, WI  53114

262-724-3635 Tel

262-724-5645 Fax

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