Laurel Ltd

Multiple Choice

Laurel Ltd. leased an office building to Hardy Inc. for a three year, non-renewable term. This was properly classified as an operating lease by both parties. The monthly rental is set at $ 12,000 per month. However, as an added inducement, Laurel agreed to grant Hardy a four-month rent-free period at the beginning of the lease, and a further two-month rent-free period at the end of the lease. How much rent expense should Hardy record each month during the three year period?

A) $ 12,000
B) $ 11,250
C) $ 10,667
D) $ 10,000