Prepaid and accrued expense — OpenTuition Forums

SSeiha11y ago

Dear tutors, I really need your help with the below question. The details of John's telephone bills for 20x1 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 20x1 120$ 1 May 20x1. 99$ 1August 20x1. 144$ 1 November 20x1. 122$ 1 February 20x2. 132$ Write up the telephone expense account for the year end 31 December 20x1 Your help is really appreciated Thanks

John MoffatTutor11y ago#1

Two 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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