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August 1, 2020 at 8:11 pm
Hi John. Please could you help me with Question 4. I am not sure about the answer. I have tried different ways to get the answer but I am stuck.
August 1, 2020 at 8:27 pm
I mean question 6 sorry. I am confused
John Moffat says
August 2, 2020 at 9:47 am
They are receiving rent. The cash received during the year was 1,154,880. 50,880 of the cash was rent they were owed at the start of the year, so subtract it. At the end of the year they are owed 44,160, so add it.
At the start of the year they had received 68,880 in advance – this is this years income so add it. At the end of the year they had received 74,880 in advance – this is next years income so subtract it.
Therefore the income this year is 1,154,880 – 50,880 + 44,160 +68,880 – 74,880 = $1,142,160
July 8, 2020 at 6:59 am
Good day Mr Moffat !
I was confused with question 1 transaction 2 where it says the company has paid for 8 month and the answer shows that we need to multiply 21600 by 8/12, can’t we just add the number itself without multiplying it by 8/12
Thank you in advance
July 8, 2020 at 8:37 am
They have paid the insurance for a year (for the period 1 September 2008 to 31 August 2009).
As at 31 December 2008 they have therefore prepaid the period from 1 January 2009 to 31 August 2009, which is 8 months of the total payment.
July 29, 2020 at 7:24 am
I also forgot to include the prepayment as current assets, but I wonder why the other questions don’t have to do so? As asking about what figure should be appear in company’s statement, we only need to calculate the expense included those periods of 12 months.
July 29, 2020 at 8:52 am
I don’t know what other questions you are referring to. On the SOPL we show the expense incurred for the period (not the amount actually paid) and on the SOFP we show accruals (any amount still owing) and prepayments (any amount paid in advance). Have you watched my free lectures on this?
April 27, 2020 at 5:50 pm
Thank you very much for your work, Question 4 has given me an issue, What does it mean to say premium for the year ended 31 March 2008 paid in April 2007 $25,920.00? Does this mean the company has paid premiums for the year 2008 when they paid in April for the year 2008 or they paid in advance for the year 2009? I am confused with the question
April 4, 2020 at 5:01 pm
hello sir, first i would like to thank you for contributing to develope such and amazing tutoring platform. it is very much appreciated. With regards to question 3 sir, please what is there most time effective way of coming up with the answer. i was able to solve it but it took me so much time and given the nature of the exam, i believe time management is of great importance. Thank you
April 4, 2020 at 7:03 pm
Thank you for your comment.
Certainly time management is important, so did you study the pop-up answer after you had attempted the test?
The fastest way is to take the total cash paid during the period, and then to subtract the accrual at the start of the year and add the accrual at the end of the year.
April 6, 2020 at 5:40 pm
Thank you very much sir.
March 11, 2020 at 11:14 am
can u give me Q3? WHY 2/3*798.00???
June 17, 2020 at 11:26 am
Year ending December 2006. So only amounts from Jan 2006-Dec 2006 will be considered. $798 corresponds to Quarter “TO” February 2006 which means it includes Dec 2005, Jan 2006 and Feb 2006. 2/3 means we are only considering 2 months of Jan and Feb out of the 3. Hope this is okay.
June 17, 2020 at 4:23 pm
February 10, 2020 at 5:22 pm
All the words and numbers in question 3 are mixed up because of the alignment.
February 2, 2020 at 6:15 pm
Oh my God! These questions really tested my accruals and prepayments knowledge and came through with 100% (12 points). This topic is one of the underpinning theories of accountancy and used in many accounting activities. It is a tricky area but once mastered like reporting on ratios it can be so rewarding if you want to push yourself in your career.
I am with CIMA but needed to practice questions likes these so thank Open Tuition.
December 16, 2019 at 9:00 am
kindly help with Question #2.
December 16, 2019 at 2:40 pm
For the SOPL we need the expense for the period 1 May 2008 to 30 April 2009. 1 May 2008 to 30 June 2008 is 2 months, so the rent for this period was 2/12 x 201,600 = 33,600. I July 2008 to 30 April 2009 is 10 months, so the rent for this period was 10/12 x 230,400 = 192,000. So the total expense for the year is 33,600 + 192,000 = 225,600.
For the SOFP, the last payment during the year was on 1 April 2009. Rent is paid in advance and so this payment was for April, May and June. May and June are in the next accounting period and to there is a prepayment of 2 months rent. 2/12 x 230,400 = 38,400.
January 29, 2020 at 6:23 pm
answer 1: 28,800+(28,800*2%)+(21,600*8/12)+9600=53,376 answer 2: (201,600*2/12)+(230,400*10/12)=225,600
October 13, 2019 at 3:33 pm
my question is based on question 1 : I am confused with transaction 2. Insurance paid for in advance is 8 months and should we not subtract that from the SOFP amount as it is not considerable for the current period ? Please help me clear my doubts ASAP
October 14, 2019 at 6:41 am
They have prepaid the insurance for the period from 1 January 2009 to 31 August 2009, which is 8 months.
The prepayment appears as a current asset in the Statement of Financial Position.
July 14, 2019 at 8:04 pm
Q1. 1) Why should we include 28,800 in the SOFP under current asset? Is this because cash inflow? Q5. In the requirement it said that statement of profit and loss for rent receivable. My question is Receivable is the SOFP item why the requirement said SOPL?
July 15, 2019 at 6:18 am
1. The 28,800 was money lent to an employee, so it is a receivable which is a current asset.
2. Although I can understand it being confusing, ‘rent receivable’ is the name we give to the rental income and the income does appear in the SOPL
July 15, 2019 at 2:13 pm
Thanks a lot sir
July 15, 2019 at 5:38 pm
You are welcome 🙂
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