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The electricity account for the year ended 30 June 20X1 was as follows.
Opening balance for electricity accrued at 1 July 20X0 300
Payments made during the year
1 August 20X0 for three months to 31 July 20X0 600
1 November 20X0 for three months to 31 October 20X0 720
1 February 20X1 for three months to 31 January 20X1 900
30 June 20X1 for three months to 30 April 20X1 840
1 August 20X1 for three months to 31 July 20X1 840
Which of the following is the appropriate entry for electricity?
Accrued at 30 June 20X1/ Charge to SPL year ended 30 June 20X1
A. $460/ $3,320
B.$560/ $3,420
C.$Nil/ $3,060
D.$560/ $3,320
The answer is D. It is calculated that accrued expenses are 600+720+900+840+840*2/3=3620
then charged to SPL =3620 – balance b/ fwd 300 = 3320But actually I think the real accrued expenses might be 600*1/3(X0/7/1-X0/7/31)+ 720+ 900+ 840+ 840*2/3= 3220
then the answer is 560/ 2920Am I wrong? I just don’t know why the revision kit answer don’t calculate 600*1/3 but 600.
Thank you professor!
You are wrong 🙂
The accrued expenses at the end of the year are 2/3 x 840 = 560.
The total paid during the year = 600 + 720 + 900 + 840 = 3,060
Therefore the expense for the year = 3,060 + 560 – 300 = 3,320.
(The opening accrual turned out to be estimated wrongly, but we cannot now go back and change last year. I explain this in my free lectures – the lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.)
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