On December 1, 2011, Blake Inc. signed an operating lease for a warehouse for ten years at $24,000 per year. Upon execution of the lease, Blake paid $48,000 covering rent for the first two years. How much should be shown in Blake's income statement for the year ended December 31, 2011, as rent expense?
A) $0
B) $2,000
C) $24,000
D) $48,000

Question

Quizplus · Accepted Answer

Since Blake paid rent for the first two years in advance, only 1/10 of the total payment applies to the current year (2011). Therefore, the rent expense for 2011 is $2,000 (i.e., $48,000/10).