Rent expense in Burr Company's income statement is $480,000. If Prepaid Rent was $120,000 on 1 January and is $95,000 on 31 December, the cash paid for rent during the year is:

Question

Quizplus · Accepted Answer

The amount of rent expense in the income statement is not the same as the amount of cash paid for rent during the year. 
To find the cash paid, we need to adjust for the change in prepaid rent balance. 
Cash paid for rent = rent expense - decrease in prepaid rent + increase in prepaid rent 
Cash paid for rent = $480,000 - ($95,000 - $120,000) 
Cash paid for rent = $455,000

Rent Expense in Burr Company's Income Statement Is $480,000