Wireless Technologies reports operating expenses of $2 million.Operating expenses include rent expense.Prepaid rent at the beginning and end of the year are $20,000 and $70,000,respectively.All other operating expenses were paid in cash as incurred.What is the amount of cash paid for operating expenses?

Question

Quizplus · Accepted Answer

Prepaid rent at the beginning of the year is not included in the cash paid for operating expenses, but the prepaid rent at the end of the year is considered as an operating expense. Therefore, we need to subtract the prepaid rent at the end of the year from the total operating expenses, and then add the prepaid rent at the beginning of the year to calculate the amount of cash paid for operating expenses. 
Calculation: 
Operating expenses = $2,000,000 
Prepaid rent at the beginning of the year = $20,000 
Prepaid rent at the end of the year = $70,000 
Cash paid for operating expenses = Operating expenses - Prepaid rent at the end of the year + Prepaid rent at the beginning of the year 
Cash paid for operating expenses = $2,000,000 - $70,000 + $20,000 = $1,950,000 
Therefore, the best choice is D, $2,050,000.

Wireless Technologies Reports Operating Expenses of $2 Million