On December 1,2014,Boron Inc.signed an operating lease for a warehouse for ten years at $15,000 per year.Upon execution of the lease,Boron paid $30,000 covering rent for the first two years.How much should be shown in Boron's income statement for the year ended December 31,2014,as rent expense?
A) $0
B) $1,250
C) $15,000
D) $30,000

Question

Quizplus · Accepted Answer

Only the portion of the lease payment that is used during the current accounting period should be recognized as rent expense. Since the payment made by Boron covers the first 2 years of the lease, only 1/10th or $1,500 of the payment should be recognized as rent expense for the year ended December 31, 2014. Therefore, the answer is B) $1,250.