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This is a section C question from the revision kit (Question 269). Please explain how to calculate the rent received aspect of this question and why the rent is multiplied by 1/3.
E – commerce pie has claimed a deduction for repairs of £95,300 in respect of awarehouse which was purchased on 21 May 2021. The warehouse was purchased in a dilapidated state, and could not be let until the repairs were carried out. This fact was represented by a reduced purchase price. The property was first let out on 1 July 2021.
E-Commerce pie did not receive the rent due of £16,200 in respect of this warehouse for the quarter ended 31 May 2022 until 1 April 2022. None of this amount has been taken into account in calculating the property business profit for the year ended 31 March 2022.
Property income -156,700
Quarter ended May means that 16,200 unpaid relates to Mar-May, as a March year end we’d accrue one third.
Q.268.) On 1 July 2020, Maison Ltd purchased a freehold warehouse. The warehouse is currently surplus to requirements, so it was let out from 1 November 2020. However, the warehouse was purchased in a dilapidated state and could not be let until repair work was carried out during August 2020. This fact was represented by a reduced purchase price. Your assistant has listed any income and expenditure that is potentially relevant:
1 July 2020-Insurance for the period to 31 March 2021-(1,035)
August 2020-Initial repairs -{17,680)
28 September 2020-Advertising for tenants- (780)
1 November 2020-Security deposit of two months’ rent -12,200
1 November 2020-Rent for the quarter ended 31 January 2021-18,300
1 February 2021 -Rent for the quarter ended 30 April 2021 -18,300Can you please explain in detail this question how they took 2/3 of rent for 1/02/2021. Because unfortunately I still don’t understand.
Firstly, I’ve been on holiday and unavailable and secondly I provide this service free of charge.
Have you read the chapter in rental income? It clearly explains the accruals basis for rental income and the video for this chapter gives an explanation of this concept.
Hi Jilly B. I have read the chapter on rental income and i have watched the lectures but i can’t seem to understand how to arrive at the answer. I would appreciate if you can explain. And i guess i let the exam stress get to me sometimes. so apologies for being pushy.
Hi
Apology accepted.
Don’t let it get to you becasue it often means you dont function as well as you could in the exam. Take time out from revision and breathe.The rent received on 1st Feb £18,300 was for 3 months – now only 2 months rent needs to be accounted for in the year ended 31st March – the rent for Feb and the rent for March.
The rent for Aoril will be accounted for in the next financeial year.
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