Rent expense in Marrin Company's 2010 income statement is $420,000. If Prepaid Rent was $70,000 at December 31, 2009, and is $95,000 at December 31, 2010, the cash paid for rent during 2010 is:

Question

Quizplus · Accepted Answer

The actual cash paid for rent during 2010 can be calculated by adding the increase in prepaid rent to the rent expense and then subtracting the prepaid rent at the beginning of the year.

Increase in prepaid rent = Prepaid rent at end of 2010 - Prepaid rent at end of 2009 = $95,000 - $70,000 = $25,000

Actual cash paid for rent = Rent Expense + Increase in prepaid rent - Prepaid rent at beginning of the year = $420,000 + $25,000 - $70,000 = $375,000

Therefore, the cash paid for rent during 2010 is $445,000 (option B).

Rent Expense in Marrin Company's 2010 Income Statement Is $420,000