- This topic has 3 replies, 2 voices, and was last updated 2 years ago by
.
-
Posts
-
I have watched the accruals and prepayment chapter on OT. I finding the question below difficult to understand.
A company has sublet part of its offices and in the year ended 30 November 20X3 the rent receivable was:
Until 30 June 20X3 $8,400 per year
From 1 July 20X3 $12,000 per yearRent was paid quarterly in advance on 1 January, April, July, and October each year.
What amounts should appear in the company’s financial statements for the year ended 30 November 20X3?
Rent receivable Statement of financial position
A $9,900 $2,000 in sundry payables
B $9,900 $1,000 in sundry payables
C $10,200 $1,000 in sundry payables
D $9,900 $2,000 in sundry receivablesAnswer is B
I don’t understand why they have receivables of 9,900 since they are paying the rent quarterly in advance this year, there shouldn’t be any left or very little at the year end.
Please help!
It is the terminology that is confusing you.
Rent receivable does not mean ‘receivables’ (despite the use of the word). In this context it is meaning the rental income earned during the year (i.e. the amount to appear in the SOPL).
- The topic ‘BBP kit question 10.4, help needed!!’ is closed to new replies.