Ludwig Company's prepaid rent was $9,000 at December 31, 2012, and $13,000 at December 31, 2013. Ludwig reported rent expense of $19,000 on the 2013 income statement. What amount would be reported in the statement of cash flows as rent paid using the direct method?

Question

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To determine the amount of rent paid using the direct method, we need to adjust the rent expense for the change in prepaid rent. The prepaid rent increased by $4,000 ($13,000 - $9,000), meaning that $4,000 of rent was paid in advance and not included in the rent expense. Therefore, the amount of rent paid using the direct method is equal to $19,000 - $4,000 = $15,000. However, we need to add back the decrease in prepaid rent to the rent paid, which is $13,000 - $9,000 = $4,000. Thus, the amount reported in the statement of cash flows as rent paid using the direct method is $15,000 + $4,000 = $23,000 (Choice C).

Ludwig Company's Prepaid Rent Was $9,000 at December 31, 2012