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Hey guys I have a question in regards to a cash to accrual problem in regards to prepaid rent.
Wade & Sons had cash inflows of $107,000 and outflows of $59,000 during 2009. The following information was available:
Accounts receivable, 1/1/09: $43,000
Accounts receivable, 12/31/09: 61,000
Accrued liabilities, 1/1/09: 29,670
Accrued liabilities, 12/31/09: 73,000
In addition, unearned revenue of $5,300 (on the books at 1/1/09) were earned during the year and 6 months of prepaid rent of $18,000 was paid on November 1, 2009.
Basically I have it all figured out until the prepaid rent part. My professor during class said that $12,000 of the prepaid rent [$18,000 - ($18,000/6) x 2] had to be subtracted from the cash flows and I was just wondering as to why it was $12,000 instead of $6,000. Thanks!
Wade & Sons had cash inflows of $107,000 and outflows of $59,000 during 2009. The following information was available:
Accounts receivable, 1/1/09: $43,000
Accounts receivable, 12/31/09: 61,000
Accrued liabilities, 1/1/09: 29,670
Accrued liabilities, 12/31/09: 73,000
In addition, unearned revenue of $5,300 (on the books at 1/1/09) were earned during the year and 6 months of prepaid rent of $18,000 was paid on November 1, 2009.
Basically I have it all figured out until the prepaid rent part. My professor during class said that $12,000 of the prepaid rent [$18,000 - ($18,000/6) x 2] had to be subtracted from the cash flows and I was just wondering as to why it was $12,000 instead of $6,000. Thanks!