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Could you give me the best method used to answer these type of questions?
B, a limited liability company, receives rent for subletting part of its office premises to a number of tenants. In the year ended 31 December 20X4 B received cash of $318,600 from its tenants.Details of rent in advance and in arrears at the beginning and end of 20X4 are as follows:
31 December
20X4 20X3
$ $
Rent received in advance 28,400 24,600
Rent owing by tenants 18,300 16,900
All rent owing was subsequently received
What figure for rental income should be included in the statement of profit or loss of B for 20X4?
A $341,000
B $336,400
C $300,800
D $316,200Total cash received = 318,600.
This will include rent that was owed from last year of 16900, and so this is not income of this year and needs subtracting.
Also rent of 24600 for this year was paid last year and is therefore not included in the 318600, so this needs adding.At the end of this year, we had received 28400 in advance, so the cash was received this year but is next years income, so this needs subtracting.
Finally at the end of this year we are still owed 18300 and so this needs adding.
So the total income for this year is 318600 – 16900 + 24600 – 28400 + 18300 = 297900
Need explanation,Pls test question 3 chapter 4 I could not understand the double entry as I got confused when cash received was credited. Thanks
Sorry – I added up wrong.
If you check my workings in the last line of my answer, then you will see that it is perfectly correct except that the final total comes to 316,200 (not 297,900).They are receiving rent, therefore the double entry for cash received is Dr Cash; Cr Rental income.
However, to use t-accounts in the exam is unnecessary and wastes time. It will only be asked as an MCQ in Section A and there it is speed that is important (and nobody looks at your workings).
It is exactly the same as the question asked in the first post, just with different figures, and the best approach is to do it exactly the same way as I did in my answer to the first post.
Please I need help on this as I have work through it but could not understand how they got their answer. A company pays rent quarterly in arrears on 1 January , 1 April, 1 July and 1 October each year. The rent was increased from 90000 to 120000 per year as from 1 October 2002. What rent expense should be included in company
Please I need help on this as I have work through it but could not understand how they got their answer. A company pays rent quarterly in arrears on 1 January , 1 April, 1 July and 1 October each year. The rent was increased from 90000 to 120000 per year as from 1 October 2002. What rent expense should be included in company’s financial statements for the year ended 31 January 2003? Thanks.
You have not said what the business’s year end is, and so it is impossible to answer.
Thanks a lot you had saved me from a severe headache I appreciate may you live longer to do more of this.
Ahhh…….you typed it again with the year end at the same time as I was typing my reply before 🙂
The expense from 1 Feb 2002 to 30 September 2002 (8 months) is 8/12 x 90,000 = 60,000.
The expense from 1 October 2002 to 31 January 2003 (4 months) is 4/12 x 120,000 = 40,000.So the total expense for the year = 60,000 + 40,000 = 100,000
Pls I need explanation on the best way/method to solve this.
At 31 march 2002 a company had oil to be used for heating costing $8200 and an unpaid heating oil bill for $3600.
At march 2003 the heating oil in hand was 9300 and there was an outstanding heating oil bill of $3200.
Payment made for heating oil during the year ended 31 march 2003 totalled $34600.
Based on these figures, what amount should appear in the companyPls I need explanation on the best way/method to solve this.
At 31 march 2002 a company had oil to be used for heating costing $8200 and an unpaid heating oil bill for $3600.
At march 2003 the heating oil in hand was 9300 and there was an outstanding heating oil bill of $3200.
Payment made for heating oil during the year ended 31 march 2003 totalled $34600.
Based on these figures, what amount should appear in the company’s statement of profit or loss and other comprehensive income for heating oil for the year?
Thanks.You know how much cash was paid, and so first you need to adjust by the opening and closing accruals to fine out how much oil was purchased.
Then you need to adjust the purchases figure by the opening and closing inventories to find how much was used – this is then the expense for the year.
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