On January 4, 2004, Frye Co. leased a building to Cole Corp. for a ten-year term at an annual rental of $120,000. At inception of the lease, Frye received $480,000 covering the first two years' rent of $240,000 and a security deposit of $240,000. This deposit will not be returned to Cole upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $480,000 should be shown as a current and long-term liability in Frye's December 31, 2004 balance sheet?
Current Liability Long-term Liability
a. $0 $480,000
b. $120,000 $240,000
c. $240,000 $240,000
d. $240,000 $120,000
Answers a conceptual question on current and long term liabilities.