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I’m having trouble understanding this answer…
‘You are the audit senior working on the audit of Porthos for year ended 31 December 20X7…..
Porthos earns a small amount of rental income by renting out surplus warehouse space to a local company. The rental agreement shows that annual rent from 1 March 20X5 was $24,000, increased from $21,000 per annum.
Question: You are using the proof in total calculation to assess the accuracy of rental income. Which of the following correctly shows the calculation which would be used?’
The correct answer is C ($21,600*2/12)+($24,000*10/12). But I thought it would be A $24,000 x 12/12 given that the year end to test is 31 Dec X7 (31 Dec X6 to 31 Dec X7).
Even if its 20X6, but still the answer should be $24,000 x 12/12 given that the year end to test is 31 Dec X7 (31 Dec X6 to 31 Dec X7) na?
What should be the answer, isn’t the correct answer $24,000 x 12/12?
But in the solution they have given correct answer as $21,600*2/12)+($24,000*10/12). This is I didn’t understand. Can you explain me?I cannot find the source of the Q or the A but based on what is written in the answer the rent was 21,000/12 = 1,750 for 2 months of the year and 2,000 per month (24,000/12) for the remaining 10 months.
yes but I didn’t understand that why it should be 21,000/12 = 1,750 for 2 months of the year and 2,000 per month (24,000/12) for the remaining 10 months. Why the correct answer is not : 24,000 x 12/12?
Because the rent increases from 21,000 to 24,000 on 1 March which is 2 months into the current year (when the typo in the date is corrected).
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