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Good Evening John. I’m struggling to find out on how to get the answer and was wondering if you can assist?
Q) On 1 January 20×5, Willy Mossop owed $2000 in respect of the previous year’s electricity. Willy made the following payments during the year ended 31 December 20X5:
– 6 February $2800
– 8 May $3000
– 5 August $2750
– 10 November $3100At 31 December 20X5, Willy calculated that he owed $1800 in respect of electricity for the last part of the year.
What is the electricity charge to the statement of profit or loss?
A) 1800
B) 11450
C) 11650
D) 13450The correct answer is B but please can you explain the calculation behind it?
Many thanks,
Bazif Zaidi
I do not know why you have headed up your post as ‘pro forma t-account’ because you cannot be required to produce t-accounts in the exam (and using t-accounts in your workings for this question wastes time).
The total cash paid during the year is 2800 + 3000 + 2750 + 3100 = $11,650.
Of this, 2,000 will be for the amount owing at the start of the year, which is not an expense of this year.
That brings the total down to 11,650 – 2,000 = 9,650.
In addition they are still owing 1,800 at the end of the year, and this is an expense for this year.
So the total expense is 9,650 + 1,800 = $11,450.
This is all explained 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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