Becker_Review_Problems_Week_4- Ch 21

Becker_Review_Problems_Week_4- Ch 21 - BECKER REVIEW...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Week Four NEW CPA QUESTION The following is taken from the Becker CPA Review with permission: Mall Company leased office premises to Sly, Inc. for a five-year term beginning January 2, 2002. Under the terms of the operating lease, rent for the first year is $8,000 and rent for years 2 through 5 is $12,500 per annum. However, as an inducement to enter the lease, Mall granted Sly the first six months of the lease rent-free. In its December 31, 2002, income statement, what amount should Mall report as rental income? a. $ 12,000 b. $ 11,600 c. $ 10,800 d. $ 8,000 Remember to show calculations! Taken from Becker CPA Review with permission -- company names and dates changed F5/77-CPA-00410 Solution: ”c” is correct. Rental income is recorded when it is earned (accrual basis), not when the cash is received. Therefore the total rental income should be recognized ratably over the 5 years. Rent in year 1 (1/2 of $8,000) = $ 4,000
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 3

Becker_Review_Problems_Week_4- Ch 21 - BECKER REVIEW...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online