Long, Inc. uses the accrual basis of accounting. Long's rent expense account had a balance of $18,000 at the end of the year. The prepaid rent account had a balance of $5,000 at the beginning of the year and a balance of $9,000 at the end of the year. How much cash was paid for rent during the year?

Question

Quizplus · Accepted Answer

The cash paid for rent is calculated by starting with the rent expense for the year, then adjusting for the change in the prepaid rent account. The rent expense is $18,000. The prepaid rent increased by $4,000 ($9,000 - $5,000), which means that the cash paid was more than the expense recognized. Therefore, the cash paid for rent is $18,000 + $4,000 = $22,000.

Long, Inc Uses the Accrual Basis of Accounting