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On November 1,Year 1,Danny Company Paid $12,000 Cash to Rent

Question 63

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On November 1,Year 1,Danny Company paid $12,000 cash to rent an office for a year starting immediately.Indicate whether each of the following statements about this transaction is true or false.

Premises:
This transaction increases Danny's liabilities.
This transaction is an asset exchange transaction.
$12,000 of rent expense will be recorded in Year 2.
Danny's Year 1 income statement would not be affected by this transaction.
Danny's Year 1 statement of cash flows would be affected by this transaction.
Responses:
False
True

Correct Answer:

This transaction increases Danny's liabilities.
This transaction is an asset exchange transaction.
$12,000 of rent expense will be recorded in Year 2.
Danny's Year 1 income statement would not be affected by this transaction.
Danny's Year 1 statement of cash flows would be affected by this transaction.
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