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Understanding Accruals and Prepayments

This topic has 1 reply, 2 voices, and was last updated 10 years ago by Ken Garrett.

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October 23, 2015 at 9:05 am #278466
stasy
Member
- Topics: 3
- Replies: 4
Question?
Rent paid on 1 October 20×2 for the year to 30 September 20×3 was $12 000, and rent paid on 1 October 20×3 for the year to 30 September 20×4 was $16 000.
What figure for rent expense should be shown in the income statement for the year ended 31 Dex ember 20×3?
A. $12,000
B. $16,000
C. $13,000
D. $15,000
I am having problems understanding from what period does accrual and prepayment begin in relation to the question above.
October 23, 2015 at 9:28 am #278528
Ken Garrett
Keymaster
- Topics: 10
- Replies: 10649
Match on a time basis to the period of the income statement. We want the rent for the 12 months to 31 Dec 20×3
That is composed of:
9 months 1/1 – 30/9 X3 and
3 months 1/10 – 31/12 X3
So 12,000 x 9/12 + 16,000 x 3/12 = 13,000
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