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Howard Inc. had prepaid rent of $75,000 and $80,000 at the end of 2017 and 2018, respectively. During 2018, Howard recorded $240,000 in rent expense in its income statement.

Cash outflows for rent in 2018 were:(A) $250,000.(B) $240,000.(C) $245,000.(D) $235,000.

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Answer:

Rent recorded in income statement  240,000

Rent prepaid in 2018                           80,000

                                                             320,000

Less: Rent prepaid in 2017                  75,000

Cashflow for rent                                 245,000    

The correct answer is  C

Explanation:

In this case, we will add the rent prepaid in 2018 to the amount reported in income statement and deduct rent prepaid in 2017. This gives the cashflow for rent.

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