On July 1,2012,Rents-A-Lot Inc.paid $72,000 for 36 months of advance rent on its warehouse.What would be the amount of rent expense in the 2013 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

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Under cash-basis accounting, rent expense is recognized only when cash is paid. Since the rent was paid in advance, no rent expense would be recognized in 2013. Under accrual-basis accounting, rent expense is recognized over the period of the lease, regardless of when the cash is paid. Therefore, the rent expense for 2013 would be $24,000 ($72,000 / 36 months).