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prepayment

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › prepayment

  • This topic has 1 reply, 2 voices, and was last updated 1 month ago by John Moffat.
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  • June 26, 2022 at 2:14 pm #659342
    kyeomie
    • Topics: 1
    • Replies: 0
    • ☆

    Question:The insurance premium was paid for one year to 28 February 2021.There was no insurance policy prior to this.

    The amount stated in trial balance $5688.The accounting period ended 31 December 2020.How to solve this question?

    June 26, 2022 at 4:08 pm #659346
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49994
    • ☆☆☆☆☆

    You have not written what the question asked for.

    Assuming that the prepayment has not been recorded, then $5,688 is the amount that was paid for the year to 28 February 2021.

    Therefore, as at 31 December 2020 they have prepaid 2/12 x 5688 = 948, and the expense in the SOPL is 10/12 x 5688 = 4,740.

    This is all explained in my free lectures on accruals and prepayments. 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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