Question 1

Section A

A business pays rent quarterly in advance on 1 January, 1 April, 1 July, and 1 October. The annual rent was $24,000 until 30 June 20X4, when it increased to $30,000 per year. The business year-end is 31 August 20X4.

What is the prepayment for rent to be included in the statement of financial position at 31 August 20X4? (Enter the number only)

Accepted Answer

Identify the last payment made before year-end. Calculate what period it covers. Determine how many months of that period fall AFTER the year-end. Calculate the value of those months.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating the prepayment based on the old rent of $24,000, or calculating the expense for the year instead of the prepayment.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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