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Hi, pls am having difficulty understanding n solving this question.
A company pays rent quarterly in arrears on 1 January, 1 April, 1July and 1 October each year. The rent was increased $90,000 per year to #120,000 per year as from 1 October 2012.
What rent expense and accural should be included in the company’s financial statements
For the year ended . 31 January 2013.Thanks.
Two things first – have you watched my free lectures? Also, surely there is an answer with workings in the same book in which you found the question – you should ask which bit of the answer you are not clear about.
For the Statement of profit and loss, we want the expense for the year from 1 Feb to 31 Jan.
From 1 Feb to 30 Sep is 8 months and so the expense is 8/12 x 90000.
From 1 Oct to 31 Jan is 4 months and so the expense is 4/12 x 120000.
The two added together is the total expense for the year.The latest payment will have been on 1 Jan and so at the 31 Jan they owe for the month of January and will be owing therefore 1/12 x 120000.
This is the current liability in the Statement of financial position.Two things first – have you watched my free lectures? Also, surely there is an answer with workings in the same book in which you found the question – you should ask which bit of the answer you are not clear about.
For the Statement of profit and loss, we want the expense for the year from 1 Feb to 31 Jan.
From 1 Feb to 30 Sep is 8 months and so the expense is 8/12 x 90000.
From 1 Oct to 31 Jan is 4 months and so the expense is 4/12 x 120000.
The two added together is the total expense for the year.The latest payment will have been on 1 Jan and so at the 31 Jan they owe for the month of January and will be owing therefore 1/12 x 120000.
This is the current liability in the Statement of financial position.Two things first – have you watched my free lectures? Also, surely there is an answer with workings in the same book in which you found the question – you should ask which bit of the answer you are not clear about.
For the Statement of profit and loss, we want the expense for the year from 1 Feb to 31 Jan.
From 1 Feb to 30 Sep is 8 months and so the expense is 8/12 x 90000.
From 1 Oct to 31 Jan is 4 months and so the expense is 4/12 x 120000.
The two added together is the total expense for the year.The latest payment will have been on 1 Jan and so at the 31 Jan they owe for the month of January and will be owing therefore 1/12 x 120000.
This is the current liability in the Statement of financial position.Two things first – have you watched my free lectures? Also, surely there is an answer with workings in the same book in which you found the question – you should ask which bit of the answer you are not clear about.
For the Statement of profit and loss, we want the expense for the year from 1 Feb to 31 Jan.
From 1 Feb to 30 Sep is 8 months and so the expense is 8/12 x 90000.
From 1 Oct to 31 Jan is 4 months and so the expense is 4/12 x 120000.
The two added together is the total expense for the year.The latest payment will have been on 1 Jan and so at the 31 Jan they owe for the month of January and will be owing therefore 1/12 x 120000.
This is the current liability in the Statement of financial position.
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