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At 31 December 20X2 the following matters require inclusion in a company’s financial statements:
1. On 1January 20X2, the company made a loan of $ 12,000 to an employee, repayable on 30 April 20X3, charging interesr at 2% per year. On that date she repaid the loan and paid the whole of the interest due on the loan to that date.2. The company has paid insurance $ 9,000 in 20X2, covering the year ending 31 August 20X3.
3. In January 20X3 the company received rent from a tenant $ 4,000 covering the six months to 31 December 20X2.
For these items, what total figures should be included in the company’s statement of financial position at 31 December 20X2?
Receivables and prepayments Payables and accruals
$ $
A. 22,000 240
B. 22,240 NIL
C. 10,240 NIL
D. 16,240 6000I am not understanding how to calculate accruals and prepayments in this case. Sir please could you help me. What are the steps?
I assume that you have watched the free lecture on accruals and prepayments? (The notes are not to be used on their own – it is in the lectures that I explain and expand on the notes)
For item 1, since the employee has not repaid the loan as at 31 December, there is a receivable of $12,000 plus the interest owing for one year (1 Jan to 31 Dec).
For item 2, there is a prepayment of the 8 months from 1 Jan 20X3 to 31 August X3
For item 3, since the tenant had not paid the rent as at 31 December, there is a receivable of $4,000 that had been earned up to 31 December 20X2
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