Question

Howard Inc. had prepaid rent of $94,000 and $105,000 at the end of 2017 and 2018, respectively. During 2018, Howard recorded $259,000 in rent expense in its income statement. Cash outflows for rent in 2018 were_______.

Answer 1

The outflow of cash in respect of rent is $270,000

Step-by-step explanation:

The task is compute cash outflows on rent in the year 2018.

The prepaid rent at the end of 2017 relates to rent expense but was paid last year hence should be deducted from rent expense in the year,

On the other hand , the prepaid expense for 2018 was paid during the year hence should be added to rent expense in order to cash cash outflow relating to rent expense

Rent expense $259,000

Prepaid rent 2017 ($94,000)

prepaid rent 2018 $105,000

Cash paid in 2018 $270,000

Ultimately the outflow of cash in respect of rent in the year is $270,000