Taylor, a Cash Basis Architect, Rents the Building in Which

question 147

Essay

Taylor, a cash basis architect, rents the building in which his office is located for $5,000 per month. He commenced his practice on February 1, 2017. In order to guarantee no rent increases during an 18-month period, he signed an 18-month lease and prepaid the $90,000 on February 1, 2017. How much can Taylor deduct as rent expense for 2017?

---

Definitions:

Net Income

The total profit or loss of a company after all expenses, including taxes and operating costs, have been subtracted from revenues.

Break-Even Point

The point at which total cost and total revenue are equal, meaning there is no profit or loss.

Direct Materials

The raw materials that are directly traceable to the manufacturing of a product and are integral to its production.

Direct Labour

The amount of effort contributed by employees who work directly on manufacturing a product or delivering a service.