Place Line Lease For Free

Under U.S. GAAP, rent in a company's financial statements should be recorded on a straight-line basis. To calculate monthly rent expense on a straight-line basis, you must first calculate the total cash paid for rent over the entire lease life and then divide by the number of months (i.e. 4 years = 48 months).

To calculate straight-line rent, aggregate to rent payments' total cost and divide it by the total contract term. The result is the amount that needs to be charged for the expense in each month of the contract.

What is deferred rent? Deferred rent is a liability resulting from the difference between actual cash paid and the straight-line expense recorded on the lessee's financial statements for an operating lease. This was an account specifically used under ASC 840 lease accounting.

Under both ASC 840 and ASC 842, the formula to calculate the straight-line expense is as follows: Total net lease payments divided by the total number of periods in the lease.

The straight-line concept is based on the idea that the usage of the rental arrangement is on a consistent basis over time; that is, the rented asset is used at about the same rate from month to month. To calculate straight-line rent, aggregate the total cost of all rent payments, and divide by the total contract term.

Calculating the straight-line expense of an asset is incredibly straightforward. You just take the total amount of lease payments and divide it by the number of months of the lease term.

Adjust the monthly straight-line amount for the remaining period by the amount of the monthly increase. For example, if your monthly payment was $1500 and increased by $150 per month, you should record $1,650 per month going forward.