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Hello,
could you help me with one of the questions in the specimen exam:
A company receives rent from a large number of properties. The total received in the year ended 30 April 20X6 was $481,200.
The following were the amounts of rent in advance and in arrears at 30 April 20X5: $28.700 and $21.200.
The following were the amounts of rent in advance and in arrears at 30 April 20X6: $31.200 and $18.400.
What amount of rental income should appear in the company’s statement of profit or loss for the year ended 30 April 20X6?The answer is 475.900. How to approach this type of questions? I started with a receivables t-account but the balancing figure is not the one I am looking for.
Thanks!They received cash of 481,200. This will include 21,200 that was owing from last year – so is income of last year – that needs subtracting. In addition they are owed 18,400 at the end of this year – this is income of this year and so needs adding.
It does not include 28,700 that was received last year, but is this year income – so that needs adding.
Finally, it does include 31,200 which was received this year but is next years income – so that needs subtracting.
So the income for this year is 481,200 – 21,200 + 18,400 + 28,700 – 31,200 = 475,900.
(Don’t use t-accounts – it takes longer, and you will never be required to write up a t-account in the exam 🙂 )
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