ACCRUALS AND PREPAYMENTS

I will help you, but I am puzzled because presumably the book in which you found the question will also have answer (if it does not then you should be using a different book 🙂 )

In future you should ask which bit of the answer is causing you a problem rather than just expect me to provide one.

Since this years insurance is 10% more than last years, it means that this year is 110% of last year and so last years must have been 13200/110% = 12,000.

We want the expense from 1 April 2014 to 31 March 2015.

From 1 April 2014 to 30 June 2014 is 3 months and so the expense is 3/12 x 12,000 = 3,000
From 1 July 2014 to 31 March 2015 is 9 months and so the expense is 9/12 x 13,200 = 9,900
So the total expense for the year is 12,900.

As at 31 March 2015 they have prepaid the period from 1 April 2015 to 30 June 2015, which is 3 months. So the prepayment is 3/12 x 13,200 = 3,300

Are you watching our free lectures? They form a complete course and cover everything you need to be able to pass F3 well. The only extra you need is a Revision Kit in order to be able to practice lots of questions.

wyingjie: Please don’t answer in this forum – it is Ask the Tutor and you are not the tutor 🙂
(but please do answer in the other F3 forum, which is for students to help each other).

Also, although your journal entries are fine, the question only asks what will be in the final accounts. There is very little testing of debits and credits in Paper F3 (computers do that these days) and since the question would appear as a multiple choice question, to prepare t-accounts or write down the entries takes far too long – the biggest problem with the exam is speed (and nobody will look at the workings anyway).

You really should not waste your time doing questions for which there are no answers 🙂

From 1 Dec 2013 to 30 June 2014 is 7 months and therefore the expense for this period is 7/12 x 36000 = 21000
From 1 July 2014 to 30 Nov 2014 is 5 months and therefore the expense for this period is 5/12 x 45000 = 18750
So the total expense for the year is 39750

As at the 30 Nov 2014, the last rent paid will have been on 1 Oct and this would have been for July, August and September. So they will have an accrual for the 2 months still owing which will be 2/12 x 45,000 = 7500.

It is impossible for me to produce t-accounts here.
Also, you cannot be asked to produce t-accounts in the real exam.

Surely the book in which you found the question also has an answer? If you say which bit of the answer is causing you a problem then I will try and help.

(And I do obviously assume that you have watched our free lectures? Our lectures are a complete course for Paper F3 and cover everything you need to be able to pass the exam well.)