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10.1 A company receives rent for subletting part of its office block.
Rent, receivable quarterly in advance, is received as follows:Date of receipt: Period Covered:
1 October 20X1 3 months to 31 December 20X1 $7,500
30 December 20X1 3 months to 31 March 20X2 $7,500
4 April 20X2 3 months to 30 June 20X2 $9,000
1 July 20X2 3 months to 30 September 20X2 $9,000
1 October 20X2 3 months to 31 December 20X2 $9,000What figures, based on these receipts, should appear in the company’s financial statements for the year
ended 30 November 20X2?
Statement of profit or loss Statement of financial position
A $34,000 Debit Rent in arrears (Dr) $3,000
B $34,500 Credit Rent received in advance (Cr) $6,000
C $34,000 Credit Rent received in advance (Cr) $3,000
D $34,000 Credit Rent in arrears (Dr) $3,000the answer is C. Are they saying $7500 was charged to 31 march 2002? January 2002 to march 2002 is $7500? for the period 30 December 2001 to 31 march 2002 is $7500, then it moves up from 1 April 2002 to June 2002 its now $9000?
They are receiving rent, so nothing is being charged – it is income.
They want to know the income from 1 December X1 to 30 November X2.
From 1 Dec X1 to 31 Dec X1 ia 1 month and is part of the first receipt which was 7,500 for 3 months. So the income for Dec X1 is 1/3 x 7500 = 2,500.
From 1 Jan X2 to 31 Mar X2 is 7,500
From 1 April X2 to 30 June X2 is 9,000
From1 July X2 to 30 September X2 is 9,000
From 1 October X2 to 30 November X2 is 2 months and is part of the 9,000 that was for 3 months to 31 December. So the amount for these 2 months is 2/3 x 9,000 = 6,000Therefore the total income is 2,500 + 7,500 + 9,000 + 9,000 + 6,000 = 34,000.
As at 30 November X2 they had already paid up to the 31 December X2, and so they had received one month (December) in advance. Since the bill for 9,000 for 3 months, the amount received in advance for 1 month is 1/3 x 9,000 = 3,000.
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