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Help with this Question please…..
A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year. The rent was increased from $90,000 per year to $120,000 per year as from 1 October 20X2.
What rent expense and accrual should be included in the company’s statements for the year ended 31 January 20X3?
Rent expense Accrual
A 100,000 20,000
B 100,000 10,000
C 97,500 10,000
D 97,500 20,000In future, please do not simply set questions and expect an answer.
You must have a printed answer in the same book in which you found the question, and so you should say what you do not understand in the answer and then I will try and help!From 1 Feb 20X2 to 30 Sep 20X2 (8 months) the rent is 90,000, and so the rent for that period is 8/12 x 90,000.
From 1 Oct 20X2 to 31 Jan 20X3 4 months) then rent is 120,000, and so the rent for that period is 4/12 x 120,000.
The total rent expense is the two added together.As at 31 Jan X3, the last payment will have been on 1 January, and so they owe (and need an accrual) for the month of January, which is therefore 1/12 x 120,000.
Hello, can you please explain why the rent is not paid starting from Jan 1st? I don’t understand why its paid starting Feb 1st?
Hello, can you please explain why the rent is not paid starting from Jan 1st? I don’t understand why its paid starting Feb 1st? Sorry this is posted twice I don’t think I posted it properly the first time?
The question wants the expense for the year ended 31 January. So the year must have started on 1 February!
Folisha wrote:Thank you and my apologies i will state what i don’t understand next time.
I figured out the problem! Thanks a lot for the explanation
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