CIMA BA3 · Chapter 9 · Question 1 of 10
A business with a 31 December year end pays rent quarterly in advance on 1 January, 1 April, 1 July and 1 October. Annual rent was $12,000 until 31 March 20X5 and $15,000 a year from 1 April 20X5. What is the rent expense for the year ended 31 December 20X5?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $14,250
Explanation
January to March: $12,000 x 3/12 = $3,000. April to December: $15,000 x 9/12 = $11,250. Total expense = $3,000 + $11,250 = $14,250. Because rent is paid in advance at the start of each quarter, there is no accrual or prepayment at the year end.
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