Countryside Acres Apartment Complex had the following transactions during the year:

Rental Income collected for Apt A-F	$216,000
12 months prepaid rental from new tenant in Apt G who moved in on November 1	36,000
Operating Expenses (except for interest)	24,000
Prepaid Interest on bank loan, paid in December, for 6 months (including December)	10,200

1. Using the Cash Method, calculate the net income. Please show work.

2. The business owner paid six months of interest expense in advance during the last month of the tax year, how is this treated on the tax return? What is the reason tax law requires this treatment?