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1.In the year to 31 December 20X8 H had cash receipts in respect of rental income of $49,200.
The amounts of rent received in advance and due in arrears were as follows:
31 Dec 20X8 31 Dec 20X7
$ $
Rent received in advance 2,400 2,600
Rent due in arrears 1,800 1,400
What figure for rental income should be recorded in the statement of profit or loss for the
year ended 31 December 20X8?
A $48,600
B $49,000
C $49,400
D $49,8002. A company has sublet part of its offices and in the year ended 30 November 20X3 the rent receivable was:
Until 30 June 20X3 $8,400 per year
From 1 July 20X3 $12,000 per yearRent was paid quarterly in advance on 1 January, April, July, and October each year.
What amounts should appear in the company’s financial statements for the year ended
30 November 20X3?Statement of profit or loss Statement of Financial Position
rent receivable
A $9,900 $2,000 in sundry payables
B $9,900 $1,000 in sundry payables
C $10,200 $1,000 in sundry payables
D $9,900 $2,000 in sundry receivablesHelp please
You must not simply ask test questions and expect an answer!
You must have answers in the same book in which you found the questions, and so you should ask about whatever in the answer you are not clear about.1. They received cash of 49,200. This will include the amount that was owed to them at the start of the year (1,400) and so this needs subtracting. It will not include the amount that had been received in advance at the start of the year (2,600) and so this needs adding.
The cash received during the year will not include the amount still owing to them at the end of the year (1,800) and so this needs adding. It will include the amount received in advance (2,400) but this is not income of this year and so needs subtracting.2. From 1 December X2 to 30 June X3 is 7 months and so the income for this period is 7/12 x $8,400.
From 1 July X3 to 30 November X3 is 5 months and so the income for this period is 5/12 x $12,000.
The total expense for the year is the two added together.Since they are paying in advance, the last payment before the year end will have been on 1 October and will have been for October, November and December.
Since the year end is 30 November, they will have prepaid for one month (December), so an amount prepaid of 1/12 x $12,000. (Since none of the answers has sundry receivables of $1,000, you have either copied the question wrongly, or there is a typing mistake in your book).Hi John,
I know this is 5 years later, but I’m also struggling with this.
In reference to your point 2, you think the $1000 Sundry Payables might be a typo, but on this post
https://opentuition.com/topic/sundry-receivablespayables/
You have mentioned that it should not be considered a Receivable as the funds are not owed to us. You say it should be a Payable.I’m really struggling with this concept, as we don’t really owe the funds to anyone either ( no one provided us a service or a good), though I understand they the $1000 is a liability. Have you any clarification on whether it is definitely a Payable or Receivable – I want to try to learn which, but struggling with the concept.
Thanks in Advance,
HenryMy previous answer of 5 years ago was wrong!!
The are receiving rent, not paying it.
At the end of the year the tenant had overpaid rent and therefore the amount of the overpayment is owed back to them and is therefore a payable.
Thanks for the reply. I understand, but it’s a headscratcher for me. Appreciate your help.
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