Question 1

Section B - Case 2

Scenario: EcoBuild Ltd is preparing financial statements for the year ended 30 September 20X6. Draft profit before tax is $450,000. Adjustments required:
1) A machine costing $120,000 bought on 1 April 20X6 was incorrectly expensed in full. Depreciation is 20% straight-line (pro-rata).
2) Closing inventory was undervalued by $15,000.
3) An allowance for receivables of $8,000 needs to be created.
4) Rent of $12,000 paid for the quarter ending 30 November 20X6 was fully expensed.

Calculate the amount of rent that has been prepaid at 30 September 20X6 (in $).

Accepted Answer

The quarter ends 30 Nov, so it covers Sept, Oct, Nov. Year-end is 30 Sept. Therefore, Oct and Nov (2 months) are prepaid. $12,000 * 2/3 = $8,000.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Calculating 1 month prepaid ($4,000) or deferring the whole amount.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

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