Hi, I have a doubt in the below question from kaplan text:
The electricity account for the year ended 30 April 2005 was as follows:
Electricity accrued at 1 May 2004: 250
Payments made during the year in relation to:
Quarter ending 30 June 2004 : 400
Quarter ending 30 September 2004 : 350
Quarter ending 31 December 2004 : 425
Quarter ending 31 March 2005 : 450
Which of the following is the appropriate entry for electricity?
Accrued at 30 April 2005 Charge to statement of P/L for yr end 30 April 2005
1) $nil $1375
2) $150 $1525
3) $300 $1675
4) $450 $1825
The answer is 2 and below is the solution:
T account of electricity
Dr
cash 400
cash 350
cash 425
cash 450
"Bal cf 150"?
------
1775
------
Cr
Bal bf 250
P/L(balancing figure) 1525
----
1775
----
I cant understand how is that 150 figure calculated?
Cheers
Ash
Ask the Tutor ACCA FA
Accrual
11y ago#1They have only paid up until 31 March, and since the year end is 31 April we need to occur for one month.
With no additional information, all you can do is assume that the electricity will stay at the same rate as the latest invoice. The last invoice was for $450 and was for 3 months, so we have to assume that the amount for one extra month will be 1/3 x 450 = $150.
Thank you soo much, it makes sense now. :)
11y ago#3You are welcome :-)
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