Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.
A) $20,000.
B) $6,000.
C) $13,000.
D) $65,000.
E) $8,125.
C) $13,000.
Explanation: Amortization Expense = Cost/Lesser of Estimated Useful Life or Remaining Lease Length
Amortization Expense = $65,000/5 = $13,000
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