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A company pays rent quarterly in arrears on 1 January,1 April,1 July,1 October each year,the rent was increased from $90000 per year to $120000 per year as from 1 October 2013,what rent expense should be for the year ended 31 January 2013?
What confuses me is that why in the first quarter of 2012,the rent is $15000 instead of $22500?
I would be very appropriate for your answer,thank u very much^_^
The rent is not 15,000 in the first quarter!
I think that what is confusing you is the the year we are dealing with starts on 1 February 2012, and finishes on 31 January 2013.
The rent paid on 1 January 2012 is 90,000/4 = 22,500, but this is for January, February, and March.
However only February and March are in the company’s year, and so only 2/3 of this rent is part of their year. 2/3 x 22500 = 15,000Thanks! I see,But my new question is why it starts on 1 February instead of 1 January? Is it a principle for British companies?
I would be very appropriate for your answer,thank u very much^_^
It is not just in Britain. In most countries (certainly in the whole of Europe and in the Americas) it is up to the company to decide on what year to use for their accounting. The may use 1 February to 31 January, or they may use 1 June to 31 May, or whatever they want.
It is up to the business to decide what year to use.
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