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The year end of M Co is 30 November 20X0. The company pays for its gas by a standing order of $600
per month. On 1 December 20W9, the statement from the gas supplier showed that M Co had overpaid
by $200. M Co received gas bills for the four quarters commencing on 1 December 20W9 and ending
on 30 November 20X0 for $1,300, $1,400, $2,100 and $2,000 respectively.
Which of the following is the correct charge for gas in M Inc’s statement of profit or loss for the year
ended 30 November 20X0?
A $6,800
B $7,000
C $7,200
D $7,400Please do not simply type out a full question and expect to be provided with a full answer. You must have an answer in the same book in which you found the question, so in future ask about whatever it is in the answer that you are not clear about.
The expense in the SOPL is the total gas used during the period. How much they actually paid is of no relevance.
The total gas used is the total of the four invoices, which is $6,800.
(If at the end of the year they have paid more or less than this does not affect the expense but the amount of the over or under payments will appear in the SOFP).
Have you watched my free lectures on accruals and prepayments? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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