ACCA FA · Chapter 7 · Question 1 of 12
A business with a 31 December year end rents a warehouse. The annual rent was $24,000 until 30 April 20X5, and increased to $30,000 per year from 1 May 20X5. Rent is paid quarterly in advance. What is the rent expense for the year ended 31 December 20X5?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $28,000
Explanation
January to April: 4 months x $24,000/12 = $8,000. May to December: 8 months x $30,000/12 = $20,000. Expense = $8,000 + $20,000 = $28,000. Any rent paid in advance for January 20X6 is a prepayment and not part of the 20X5 expense.
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