- August 31, 2021 at 10:06 pm #633721bazif17Participant
- Topics: 11
- Replies: 1
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 $3100
At 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?
The correct answer is B but please can you explain the calculation behind it?
Bazif ZaidiSeptember 1, 2021 at 7:27 am #633750John MoffatKeymaster
- Topics: 56
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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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