Data Solutions reports operating expenses of $5 million.Operating expenses include rent expense.Prepaid rent at the beginning and end of the year are $120,000 and $80,000,respectively.All other operating expenses were paid in cash as incurred.What is the amount of cash paid for operating expenses?
A)$5,000,000.
B)$5,040,000.
C)$4,960,000.

Question

Quizplus · Accepted Answer

Prepaid rent is not taken into account when calculating cash paid for operating expenses. Therefore, the cash paid for operating expenses is equal to the operating expenses reported ($5 million) minus the decrease in prepaid rent ($120,000 - $80,000 = $40,000). This gives a total of $4,960,000 in cash paid for operating expenses.

Data Solutions Reports Operating Expenses of $5 Million