Tim Hortons Inc is Canada s leading chain of quick service
Tim Hortons Inc. is Canada’s leading chain of quick- service restaurants, offering a variety of coffees, donuts, and other baked goods. Assume that Tim Hortons planned to open a new store on St. George Street near the University of Toronto and obtained a 15- year lease starting January 1, 2015. Although a serviceable building was on the property, the company had to build an additional structure for storage. The 15- year lease required an $ 18,000 cash advance payment plus cash payments of $ 5,000 per month during occupancy. During January 2015, the company spent $ 90,000 cash to build the structure. The new structure has an estimated life of 18 years with no residual value.
1. Prepare the journal entries for the company to record the payment of the $ 18,000 advance on January 1, 2015, and the first monthly rental.
2. Prepare the journal entry to record the construction of the new structure.
3. Prepare any adjusting entries required at December 31, 2015, the end of the company’s fiscal year, with respect to (a) the advance payment and (b) the new structure. Assume that straight- line depreciation is used. Show computations.
4. Compute the total expense resulting from the lease for 2015.
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