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A company’s telephone bill consists of two elements.
One is a quarterly rental charge, payable in advance; the other is a quarterly charge for calls made, payable in arrears.At 1 April 20X9, the previous bill dated 1 March 20X9 had included line rental of $90. Estimated call charges during March 20X9 were $80.
During the following 12 months, bills totalling $2,145 were received on 1 June, 1 September, 1 December 20X9 and 1 March 20Y0, each containing rental of $90 as well as call charges.
Estimated call charges for March 20Y0 were $120.What is the amount to be charged to the statement of profit or loss for the year ended 31 March 20Y0?
A $2,185
B $2,205
C $2,155
D $2,215this is the answer i thought:
_DR_______expense_T_account___________CR_______
60___________________________________80
2145
120
_____________________________________30this would mean answer D
However the answer is A
why have they not included the 30 i.e.(1/3*90)??
You are showing a prepayment at 31 March Y0 of $30.
The prepayment should be 60 (April and May Y0 = 2/3 x 90)
The electricity account for Jingles Co for the year ended 30 June 20X1 was as follows.
Opening balance for electricity accrued at 1 July 20X0 300
Payments made during the year
1 August 20X0 for three months to 31 July 20X0 $600
1 November 20X0 for three months to 31 October 20X0 $720
1 February 20X1 for three months to 31 January 20X1. $ 900
30 June 20X1 for three months to 30 April 20X1 $840
Jingles Co expects the next bill due in September to be for the same amount as the bill received in June.
What are the appropriate amounts for electricity to be included in the financial statements of Jingles Co for the year ended 30 June 20X1?SOFP SOPL
A $560. $3,320
B $560 $3,060
C $860 $3,320
D $860 $3,060Please I’m confused with this question, it seems to me as if it’s not correct or maybe I just can not decode it. Firstly, it says 1Aug 20×0 for three month to 31 July 20×0.
If it is 3 months, I guess it should be from August to October. I really don’t understand how to tackle it. Kindly help Sir. It is BPP Mock exam.but included in the 2145 is a prepayment for rent for april and may 20Y0 dont we do something to deduct this?
Wemimo:
Electricity is being paid in arrears (which is what you would normally expect for electricity – you only get the bill afterwards when they know how much electricity you have used).
That is why the payment on 1 August 20X0 is for the three months to 31 July – i.e.May, June and July, and is why at the start of the year on 1 July X0 there was an accrual – they were still owing for May and June of last year.
The free lectures on accruals will help you.
Steve:
Yes you do include the prepayment.
You included it as 30, but as I wrote before it should have been for 60 (not 30) because 2 months are prepaid. Since it is 90 for every 3 months, then the prepayment is 2/3 x 90 = 60.
Everything else in your t-account is correct. It is simply you have put in 30 prepayment when you should have put in 60.
Thank you so much Sir, I do appreciate the explanation.I must have been so tired yesterday, it was difficult for me to decode the question. Thank you and have a good day.
Hi,
So according to the courses we first reverse the accrual. So we Dr Accrual (300) from last year and Cr Expense account. Then we have this 600 payment. So for current year we should expense only July (200). Why we add 600 in the account? The rest 400 is expense from previous year.
Don’t use t-accounts to answer this sort of question.
It takes too long, is not needed, and the time pressure in the exam is enormous.From the amount paid this year we subtract the opening accrual.
The opening accrual may have turned out to be wrong, but we cannot go back and correct last year – the under accrual is accounted for this year.
(And this is explained in the free lectures)Hi.
Help me15. The most recent invoice received for electricity was for the three months ended 30 April 20X9. On the basis of past experience the electricity bill for the three months ended 31 July 20X9 is expected to be $5,700. What is the accrual for electricity at 31 May 20X9?
A. $1,900 B. $5,700
C. $1,424
D. $1,426
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