ExpertMedium2 marksMultiple Choice
ACCA · Question 14 · Recording transactions and events
A company pays its annual rent of $24,000 in arrears on 31 March each year. The company's financial year end is 31 December. What is the accrual for rent at 31 December 20X5?
A company pays its annual rent of $24,000 in arrears on 31 March each year. The company's financial year end is 31 December. What is the accrual for rent at 31 December 20X5?
Answer options:
A.
$6,000
B.
$18,000
C.
$24,000
D.
$0
How to approach this question
Count the number of months between the last payment date and the year-end date. Multiply this fraction by the annual cost.
Full Answer
B.$18,000✓ Correct
The rent is paid in arrears, meaning the payment on 31 March 20X6 will cover 1 April 20X5 to 31 March 20X6. At the year-end of 31 December 20X5, the company has occupied the premises for 9 months (April to December) without paying. The accrual is 9/12 of $24,000 = $18,000.
Common mistakes
Calculating the prepayments for Jan-Mar instead of the accrual for Apr-Dec.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
65 questions · hints · full answers · grading
More questions from this exam
Q01BioGenix Ltd, a biotech startup, is deciding whether to disclose a highly uncertain contingent li...EasyQ02Which of the following bodies is primarily responsible for issuing International Financial Report...EasyQ03Which of the following are the primary responsibilities of the directors of a limited liability c...MediumQ04Titanium Forge Co, a heavy manufacturing firm, recently incurred the following costs:
1. $50,000 ...MediumQ05A company makes a 1 for 4 bonus issue of shares. The nominal value of the shares is $1. The compa...Medium