Question

ABC uses the accrual basis of accounting. The amount of rent expense for Y2 was $100,000 and the amount of cash received from customers was $200,000. Selected information obtained from the company’s comparative balance sheets is shown below:

	12/31/Y1	12/31/Y2
Prepaid Rent	$6,000	$8,000
Rent Payable	$8,000	$4,000
Accounts Receivable	$10,000	$8,000
Unearned Revenue	$7,000	$10,000

Compute the amount of cash paid for rent in Y2.

Answer 1

Particulars	Amount	Source Explanation
Amount of Rent Y2	1,00,000	As given in the Question
Less: Amount of rent in early Paeriod Y1	6,000	Preaid Rent in 12/31/Y1
Less: Amount of Rent Payable for Y2	4,000	Rent Payable in 12/31/Y2
Net amount of Rent Paid in Cash for Y2 only	90,000	Answer to the Question
Add: Along with Rent Amount paid for the Y2- Rent payable for Y1 to be also Paid	8,000	Rent Payable in 12/31/Y1
Add: Amount of prepaid rent in Y2 for the next period	8,000	Prepaid Rent in 12/31/Y2
Total Cash out flow for the Rent in Y2 including Prepaid and Outstanding	1,06,000	Additonal Info