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Dear tutors,
I really need your help with the below question.
The details of John’s telephone bills for 20×1 are as follows:
-Quarterly rental payable in advance on 1Feb, 1 May, 1Aug, and 1Nov each year 60$
-Calls paid in arrears for previous three months:
1 February 20×1 120$
1 May 20×1. 99$
1August 20×1. 144$
1 November 20×1. 122$
1 February 20×2. 132$Write up the telephone expense account for the year end 31 December 20×1
Your help is really appreciated
ThanksTwo things:
Firstly, have you watched the free lecture on accruals and prepayments?
Secondly, although you should be happy with double entry, you cannot be asked to write up t-accounts in the exam!The payment of $120 on 1 February X1 will comprise $60 rent for Feb, Mar, Apr, together with $60 for calls during Nov, Dec, Jan.
So at the start of the year there will be a DR of $20 (Januarys rent prepaid) and a CR of $40 (2 months calls: 2/3 x 60).During the year you will CR cash DR telephone which each of the payments during the year.
At the end of the year, in a similar way there will be a prepayment of $20 (the rent for Jan X2 which will have been paid in November) and an accrual of $48 (calls for November and December not paid for until the following year: 2/3 x (132 – 60)
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