On which of the following financial statements does rent expense appear?

• A. Statement of Cash Flows
• B. Statement of Retained Earnings
• C. Balance Sheet
• D. Single-step Income Statement

Answer: (D)

Verified step by step guidance

1. Understand the purpose of each financial statement: The Statement of Cash Flows shows cash inflows and outflows, the Statement of Retained Earnings tracks changes in retained earnings, the Balance Sheet lists assets, liabilities, and equity, and the Income Statement reports revenues and expenses.
2. Recognize that rent expense is an operating expense incurred during the normal course of business operations.
3. Recall that the Income Statement is specifically designed to report a company's revenues and expenses over a specific period, leading to the calculation of net income or loss.
4. Identify that the Single-step Income Statement format aggregates all revenues and subtracts all expenses (including rent expense) to arrive at net income, without categorizing expenses into operating and non-operating sections.
5. Conclude that rent expense appears on the Single-step Income Statement because it is a regular operating expense that contributes to the calculation of net income.