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Dear Tutor,
Could you please help me to answer the following question?
A company’s telephone bill consists of two elements. One is a quarterly rental charge and payable in advance; the other is a quarterly charge fro calls made, payable in arreas. At 1 April 20×9, received bill dated 1 march 20×9 had included line rental of $90. Estimated call charges during March 20×9 were $80.
During the follwoing 12 months, bills totalling @2145 were received on 1 june, 1 september, 1 december 20×9 and 1 march 20y0.
What is the amount to be charged to the statement of comprehensive income for the year ended march 20Y0.
A. $2185
B.$2205
C.$2155
D.$2215
Thanks.Please can you check that you have typed the question correctly (and not missed anything out).
As it stands there is not enough information!
(If we assume that the rental charge stays fixed throughout the period, then the total of 2145 does include 1080 for rent, and this 1080 is OK – it is the rent for 12 months.
This leaves 1065 for calls (2145 – 1080). Of this 80 is for March (the previous accounting period) which leave 985 for the first 11 months of the current accounting period. The problem is how much to accrue for March 20YO. I suppose what you could do is assume the call charge for the 11 months we are the same each month, which would mean we need to accrue 985/11 = 89.55. This would give a total charge of 1080 (rent) + 985 (11 months calls) + 89.55 (accrual for March calls) = 2155 (to the nearest dollar). However, assuming that the call charge per month is constant does not really make much sense!!)
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