I have seen this one in Becker before, I would just pray you don't get one like this on your exam.  It is just ALOT of calculations, and if you make one mistake you are screwed.

Here is how I solved it:

(1) I wrote out all the dates of when the payments were to occur.

(2) Take the monthly rent multiply it by the amount of months in the period to get what you are ACTUALLY paying. (This is why it is important to write the dates out). Total of all monthly payments should be 1,201,500. Divide that by 12 to get your monthly rent expense of 20,025 because you have to evenly allocate the rent expense over the period, including the free months.

(3)  Now that you have your monthly rent expense of 20,025, multiply that by the number of months in each period.  Compare these totals of what the expense is, to what you actually paid.

So that being said....

Jul 1 2000 - Sept 30 2000 Actual Rent = 0 Rent Expense = 60,075

Deferred = 60,075

Oct 1 2000 - June 30 2001 Actual Rent = 157,500 Rent Expense = 180,225

Deferred = 22,725

Jul 1 2001 - June 30 2002 Actual Rent = 228,000 Rent Expense = 240,300

Deferred = 12,300

Jul 1 2002 - June 30 2003 Actual Rent = 246,000 Rent Expense = 240,300

Deferred = (5,700)

Jul 1 2003 - Dec 2003 Actual Rent = 276,000 Rent Expense = 240,300

Deferred = (35,700)/2 = (17,850) **Actual Rent and Rent Expense are for the year, then divide deferred by 2**

Add up all the deferred totals and BAMM, theres your answer.

Should be "D"

Doesn't help that they give you some crazy dates.  I would not want to see this on my exam.

CanadianCPA wrote: Yeah no problem.  Its definately not a technically challenging question, I would say that I wouldn't want to see this on my exam because its a time eater due to the set up and various calculations you have to do.

Hey canadian cpa...

U have u r exams scheduled so close..I am sweating by looking at it..