On July 1,2015,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 2016 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

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Under cash-basis accounting, rent expense would only be recognized as the payments are made, so there would be no rent expense recorded in 2016 since no payment was made that year. Under accrual-basis accounting, rent expense is recognized when it is incurred, regardless of when payment is made. Therefore, the rent expense for the 2016 financial statements would be $24,000 (1/3 of the total rent paid in advance).