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Date Posted: 09:26:30 01/16/01 Tue
Author: Richard Fendler (FI 3300 Coordinator)
Subject: Leasehold improvement

A leasehold improvement is a long-term asset account.

Assume that a company leases a building as a warehouse and that the company does some structural modification to the building. The modification costs = $200,000. This $200,000 would be listed in the long-term asset section of the balance sheet as a leasehold improvement. Also, assuming a 5 year leasehold improvement life, the leasehold improvement would be depreciated at $40,000 per year.

A leasehold improvement is similar to any other gross fixed asset account in that it depreciates over time. One dis-similarity is that it is an asset that has no real collateral value. That is, the asset cannot be sold or liquidated.

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