- 4 Marks
Question
Oluyemi Ventures prepares its financial statements to March 31 each year. The business pays rent quarterly in advance on January 1, April 1, July 1, and October 1 each year. The annual rent is N600,000. On June 30, 2013, the rent was increased to N900,000 per annum.
Required:
i. Calculate the amount of rent that will be recognized in the Statement of Profit or Loss for the year ended March 31, 2014. (3 Marks)
ii. Calculate the amount to be recognized in the Statement of Financial Position as at March 31, 2014. (1 Mark)
Answer
i. Rent in the Statement of Profit or Loss
- Rent paid for April 1 – June 30, 2013 (N600,000 per annum):
N600,000 / 4 = N150,000 - Rent paid for July 1, 2013 – March 31, 2014 (N900,000 per annum):
N900,000 / 4 = N225,000 per quarter x 3 quarters = N675,000
Total rent for the year: N150,000 + N675,000 = N825,000
ii. Rent in the Statement of Financial Position
- Prepaid rent as at March 31, 2014 (April 1 – June 30, 2014):
N900,000 / 4 = N225,000
- Tags: Accrual Accounting, Rent Expense, Statement of Profit or Loss
- Level: Level 1
- Topic: Bases of Accounting: Accrual vs. Cash
- Series: NOV 2015
- Uploader: Dotse