Question

On January 4, 2020, Crane Company leased a building to Marigold Corp. for a ten-year term at an annual rental of $181000. At inception of the lease, Crane received $724000 covering the first two years' rent of $362000 and a security deposit of $362000. This deposit will not be returned to Marigold upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $724000 should be shown as a current and long-term liability in Crane’s December 31, 2020 balance sheet?

Answer 1

Out of $724,000 received by Crane, $362,000 is the security deposit and remaining $362,000 represents the rent of the current year and the next year.

Thus, $181,000 rent is the revenue of the current year and remaining $181,000 represents unearned rent revenue and hence it is a current liability.

Security deposit of $362,000 will be utilized for the rent of the last 2 years.

Thus, it is unearned rent revenue representing long term liability.

Current liability	Long term liability
$181,000	$362,000

I HOPE IT USEFUL TO YOU IF YOU HAVE ANY DOUBT PLZ COMMENT GIVE ME UP-THUMB. THANKS.....