Question

Rent expense that is paid with cash appears on which of the following statements?

Answer 1

Answer:

(E) Both B and D

Explanation:

Any expense related to current year will be part of income statement, as whether paid or not, therefore, option B is correct.

Now, when any expense is paid in cash it decreases the cash balance and accordingly shall be shown as part of operating activities in cash flow statement.

Under indirect method of cash flow statement, net income is considered under which, rent expense is already deducted, therefore, no separate treatment required, and in direct method, the treatment is to deduct such cash paid under operating activities.

Thus, it will also be part of cash flow statement.

Therefore, correct option is

(E) Both B and D