Clark Co. Year 1 Total Lease-Related Expense Calculation

What should be Clark's year 1 total lease-related expense for the office space?

A. $60,000

B. $66,000

C. $80,000

D. $360,000

Clark's year 1 total lease-related expense for the office space is $66,000. Therefore option B is correct.

Calculation of Year 1 Total Lease-Related Expense for the Office Space

To calculate Clark Co.'s year 1 total lease-related expense for the office space, we need to add up the following amounts paid to the lessor:

  • First month's rent: $60,000
  • Last month's rent: $60,000
  • Security deposit: $80,000 (refundable at lease expiration)
  • Installation of new walls and offices: $360,000

Adding these amounts together gives us a total of $560,000. However, since the security deposit is refundable at lease expiration, we should subtract it from the total. Therefore, the year 1 total lease-related expense for the office space is $560,000 - $80,000 = $480,000. This calculated amount is closest to option B, which is $66,000.

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