- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
A business sublets parts of its office accommodation.
The rent is received quarterly in advance on 1 January, 1 April, 1 July and 1 October. The annual rent has been $24000 for some years, but it was increased to $30000 from 1 July 2005.
What amounts for this rent should appear in the company’s financial statements for the year ended 31 January 2006?
Income Statement Balance Sheet
A.$27500 $5000 in sundry receivables
B $27000 $2500 in sundry receivables
C $27000 $2500 in sundry Payables
D $27500 $5000 in sundry payables
Income statement : 240000 x 5/12=10000
30000 x 7/12= 17500
Total=27500In fact i am very confused.The answer is either A or D . Please help me
Because they receive rent in advance, the last receipt before the year end of 31 January 2006 will have been on 1 January. This receipt will have been for January, February and March 2006, but only January is income for the year. The other two months have been overpaid to us and are therefore a payable at 31 January (the money is effectively owed back to the renter because they have overpaid). So the sundry payable is 2/12 x $30,000 = $5,000.
- You must be logged in to reply to this topic.