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Understanding Accruals and Prepayments

Forums › FIA Forums › Understanding Accruals and Prepayments

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by Ken Garrett.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • October 23, 2015 at 9:05 am #278466
    stasy
    Member
    • Topics: 3
    • Replies: 4
    • ☆

    Question?
    Rent paid on 1 October 20×2 for the year to 30 September 20×3 was $12 000, and rent paid on 1 October 20×3 for the year to 30 September 20×4 was $16 000.
    What figure for rent expense should be shown in the income statement for the year ended 31 Dex ember 20×3?
    A. $12,000
    B. $16,000
    C. $13,000
    D. $15,000
    I am having problems understanding from what period does accrual and prepayment begin in relation to the question above.

    October 23, 2015 at 9:28 am #278528
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10606
    • ☆☆☆☆☆

    Match on a time basis to the period of the income statement. We want the rent for the 12 months to 31 Dec 20×3

    That is composed of:

    9 months 1/1 – 30/9 X3 and
    3 months 1/10 – 31/12 X3

    So 12,000 x 9/12 + 16,000 x 3/12 = 13,000

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