- This topic has 5 replies, 3 voices, and was last updated 6 years ago by
.
- Posts
kaplan kit question.
Leddley owns two properties which it rents to tenants. In the year ended 31 December 20X6, it received $280000 in respect of property 1 and $160000 in respect of property 2. Balances on the accrued income and prepaid expense accounts were as follows:31 December 20X6 31 December 20X5
property 1 $13400 Dr $12300 Cr
property 2 $6700 Cr $5400DrWhat amount should be credited to the income statement for the year ended 31 December 20X6 in respect of rental income?
Surely your Kaplan Kit has an answer together with workings? 🙂
For property 1, they had a credit balance at the start of the year, and so they had received 12,300 last year in advance – it is income of this year.
At the end of the year they have a debit balance, and so they are still owed 13,400 for this years rent.
So the total income for this year is 280,000 + 12,300 + 13,400 = 305.700For property 2, they had a debit balance at the start of the year, so they were owed 5,400 from last year, which means that the 160,000 cash received includes 5,400 which is last years income.
At the end of the year they have a credit balance, and so the tenant has overpaid rent this year (they have paid some rent for next year) and so the 160,000 cash received includes 6,700 which is next years income – not this years income.
So the total income for this year is 160,000 – 5,400 – 6,700 = 147,900The Umbrella Shop has the following trial balance as at 30 September 20X8.
$ $
Sales 156,000
Purchases 65,000
Land and buildings – carrying value at 30.9.X8 125,000
Plant and machinery – carrying value at 30.9.X8 75,000
Inventory at 1.10.X7 10,000
Cash at bank 12,000
Trade accounts receivable 54,000
Trade accounts payable 40,000
Selling expenses 10,000
Cash in hand 2,000
Administration expenses 15,000
Finance expenses 5,000
Carriage inwards 1,000
Carriage outwards 2,000
Capital account at 1.10.X7 180,000
376,000 376,000
The following information is available.
(a) Closing inventory at 30.9.X8 is $13,000, after writing off damaged goods of $2,000.
(b) Included in administration expenses is machinery rental of $6,000 covering the year to
31 December 20X8.
(c) A late invoice for $12,000 covering rent for the year ended 30 June 20X9 has not been included
in the trial balance.
Prepare a statement of profit or loss and statement of financial position for the year ended 30 September
20X8.
ANSWER
THE UMBRELLA SHOP
STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 SEPTEMBER 20X8
$ $
Revenue 156,000
Opening inventory 10,000
Purchases 65,000
Carriage inwards 1,000
76,000
Closing inventory (W1) 13,000
Cost of goods sold 63,000
Gross profit 93,000
Selling expenses 10,000
Carriage outwards 2,000
Administration expenses (W2) 16,500
Finance expenses 5,000
33,500
Profit for the year 59,500WORKINGS
1 Closing inventory
As the figure of $13,000 is after writing off damaged goods, no further adjustments are
necessary. Remember that you are effectively crediting closing inventory to the statement of profit
or loss and the corresponding debit is to the statement of financial position.
2 Administration expenses
$
Per trial balance 15,000
Add accrual (W3) 3,000
18,000
Less prepayment (W4) (1,500)
16,500
3 Accrual
$
Rent for year to 30 June 20X9 12,000
Accrual for period to 30 September 20X8 (3
/12 ? $12,000) 3,000
4 Prepayment
$
Machinery rental for the year to 31 December 20X8 6,000
Prepayment for period 1 October to 31 December 20X8 (3
/12 ? $6,000) 1,500I cannot understand this part of answer:
3 Accrual
$
Rent for year to 30 June 20X9 12,000
Accrual for period to 30 September 20X8 (3
/12 ? $12,000) 3,000Why we do not calculate only accrual?why we dont calculate prepayment?
Thank you in advance
But they have calculated the prepayment. It is 3/12 of the administration expenses of 6,000
But in (c) there is late invoice for $12000 (covering year ended 30 June 2009),which is not included in the trial balance.
The year is ended in 30 September 2008 ,therefore there is prepayment 12000/12×9=9000.Is it correct?
- You must be logged in to reply to this topic.