On October 1,Year 1,Jason Company paid $7,200 to lease office space for one year beginning immediately.What is the amount of rent expense that will be reported on the Year 1 income statement and what is the cash outflow for rent that would be reported on the Year 1 statement of cash flows?
A)$7,200;$7,200
B)$1,800;$1,800
C)$1,800;$7,200
D)$1,200;$7,200

Question

Quizplus · Accepted Answer

Monthly rent expense = Payment of $7,200 ÷ 12 months = $600 per month
Rent expense (on the income statement)= $600 per month × 3 months = $1,800
The $7,200 payment is the cash outflow for rent that will be reported on the statement of cash flows.

On October 1,Year 1,Jason Company Paid $7,200 to Lease Office