Primer Corporation Lease Agreement Analysis

What is the lease agreement signed by Primer Corporation on April 1, 2024?

Can you explain the accounting treatment for the lease agreement entered by Primer Corporation on April 1, 2024?

Lease Agreement:

The lease agreement signed by Primer Corporation on April 1, 2024, is a five-year lease to use office space with a present value of monthly lease payments amounting to $100,000.

Accounting Treatment:

Primer Corporation records the lease by debiting the Lease Asset (Office Space) for $100,000 and crediting the Lease Liability for the same amount. This recognizes the right to use the office space and the corresponding obligation to make lease payments on the company's balance sheet.

When Primer Corporation signed the lease agreement on April 1, 2024, it marked the beginning of a five-year commitment to use office space. The present value of the monthly lease payments, totaling $100,000, was recognized to reflect the financial impact of the lease on the company's balance sheet.

The accounting treatment for this lease agreement involved creating a Lease Asset (Office Space) account, debited for the present value of the lease payments. This account represents the right to use the office space over the lease term. Simultaneously, a Lease Liability account was credited for the same amount, indicating the obligation to make lease payments. This entry ensures the proper recognition and measurement of the lease in Primer Corporation's financial records.

It is important to note that this accounting treatment assumes that Primer Corporation follows the International Financial Reporting Standards (IFRS) or a similar accounting framework that requires the recognition of both the lease asset and lease liability on the balance sheet. The specific account titles used may vary based on the company's chart of accounts.