On January 1, 2014, Mars Inc

question 389

Short Answer

On January 1, 2014, Mars Inc.leased a building to Vulcan Corp.for a ten-year term at an annual rental of $160,000.At inception of the lease, Mars received $640,000, which covered the first two years rent of $320,000 and a security deposit of $320,000.This deposit will not be returned to Vulcan 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 $640,000 should be shown as a current and long- term liability in Mars's December 31, 2014 statement of financial position?

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Definitions:

Profitable

A financial state in which income exceeds costs and expenses, resulting in a net gain.

Constraint

A limitation or restriction on a process, system, or activity.

Invested Assets

Assets that are purchased or acquired for the purpose of generating income or profit.

Production Cost

The total expense incurred in manufacturing a product, including labor, materials, and overhead costs.