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- February 28, 2021 at 4:58 am #612049
One quick question regarding short term lease exception in adjustment 5) the question told us that the lease payment represent an annual payment (payable in advance) of 1000 and lease premium 1000 the lease for 4 years. Lease expense should charge to cos so here is my answer.
(1000*4+1000/4)= 1250
Then I took difference 1250-2000(as per trial balance) I get 750
So I see answer they put this 750 under current asset (prepaid exp)
So I want to know that if qstn asked us for payable in arrears than 750 will got under current liability (accrual exp)???
Can you please help me out.. thanks in advance and yes your lectures help me a lot. Hope to pass this exam in first attempt
February 28, 2021 at 11:24 am #612108Hi,
If you are left with a credit balance then it would be an accrual. You will see this arise where there is a lease holiday and we do not have to pay one of the year’s on the lease agreement, i.e. a three year lease but we only make tow payments having not paid the one in the first year.
Glad to hear the lectures have helped, and if you’re doing the exam in March then very best of luck with it.
Thanks
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