On July 1, 2012, Rents-A-Lot Inc. paid $72,000 for 36 months of advance rent on its warehouse. What would be the amount of rent expense in the 2013 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

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Quizplus · Accepted Answer

No cash is paid in 2013, so cash-basis rent expense equals $0. The monthly rent costs equal $2,000 ($72,000/36 months) per month, so the accrual-basis rent expense for 2013 equals $24,000 ($2000/12 months).