Answer (C) is correct . No write-offs of rent receivables are mentioned. Consequently, a decrease in the rent receivable asset account implies that Ayres collected more in cash receipts from rental customers than it recognized as rental income in Year 2. In contrast, a decrease in the deferred rent income liability account signifies that Ayres recognized more rental income than it received in cash payments. To determine cash receipts from rental properties, the rental income of $140,000 should be increased by the $25,000 change in the rent receivable account and decreased by the $10,000 reduction in the deferred rent income account. Cash receipts from rental properties were therefore $155,000.
Answer (A) is incorrect because The $25,000 decrease in rent receivable should be added to rental income, not subtracted.
Answer (B) is incorrect because The $25,000 decrease in rent receivable should be added to rental income, not subtracted, and the $10,000 decrease in deferred rental income should be subtracted, not added.
Answer (D) is incorrect because The $10,000 decrease in deferred rental income should be subtracted from rental income, not added.
|
In its statement of cash flows for the end of Year 2, Ayres should report cash receipts from rental properties totaling