Straight Line Rent Income Journal Entry

Straight line rent is the concept that the total liability under a rental arrangement should be charged to expense on an even periodic basis over the term of the contract.

Straight line rent income journal entry. At the end of each month a journal entry is needed to record the rent payment and adjust the accrual balances. The method uses a simple straightforward calculation to compute the depreciation of its assets and records the expense to the general ledger using a fixed recurring journal entry throughout the asset s useful life. Months month actual rent straight line per period difference accrual deferral 1 apr 03 14 days only 1 633 00 1 914 07 281 07 2 may 03 3 000 00 4 101 58 1101 58 3 jun 03 3 500 00 4 101 58 601 58 4 jul 03 3 500 00 4 101 58 601 58 5 aug 03. As such the journal entry is as follows during the rent free period.

In april 2020 the tenant made its first payment of 17 500 for access to only 10 000 sq. The transition to asc 842 will result in the elimination of the deferred rent account from the balance sheet but will generally not impact net income or tax expense. Straight line is one of several property accounting methods used to calculate rent and lease costs. Let us assume that the depreciation will be charged on the straight line method.

Under asc 840 these incentives have to be amortized over the lease term in a straight line manner as well which results in a monthly credit to rent expense of 10 082 1 230 000 122 months. Straight line rent calculations for leases. This method does have. Straight line depreciation is an accounting method used by companies that maintain their ledger or books using generally accepted accounting principles or gaap.

This method spreads costs evenly over the fixed lease or rental term while being able to account for discounts and rent increases expected. These entries serve to amortize the rent receivable payable accounts by the same amount each month until they reach a 0 balance. The journal entry for april is as follows. To understand the accounting for tenant improvement allowances under asc 840 read our blog on ti allowances.

Under current us gaap the fasb states that even when rents are not constant the lease expense should be recognized on a. Then the annual depreciation charge can be calculated as. Show how the journal entry for the depreciation expense will be recorded at the end of the accounting period on december 31 2018.