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Hi John
I hope you are well. I am confused with this question. Could you please explain how you work this question out as it is rent income.
The income earned this year was $828,700
However this years income will include the rent that had been received in advance last year (134,600) but is this year income. So that needs subtracting because the cash was received last year.
The income received in advance this year (144,400) is not included in this years income (it is income of next year) but the cash has been received, so that needs adding.
The rent in arrears at the end of last year is not included in this years income because it was earned last year. However the cash was received this year and so needs adding.
The rent in arrears at the end of this year is part of this years income, but the cash has not been received this year and so it needs subtracting.
So the cash received this year is 828,700 – 134,600 + 144,400 + 4,800 – 8,700 = $834,600
Alternatively, if you find it easier, you could do your workings in a t-account as in the BPP answer.
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