On July 1,2018,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 2019 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

Question

Quizplus · Accepted Answer

Under cash-basis accounting, rent expense is recognized when paid, so the amount would be $0 in 2019.
Under accrual-basis accounting, rent expense is recognized when incurred, so the amount would be $24,000 for 2019 (1/3 of the total advance rent).