ACCA F3 Past Exam Accrual
A company receives rent from a large number of properties. The total received in the year ended 30 April 2006 was $4,050,000.
The following were the amounts of rent in advance and in arrears at 30 April 2005 and 2006:
| 30 April 2005 | 30 April 2006 | |
| Rent in advance | 900,000 | 990,000 |
| Rent in arrears (all subsequently received) | 200,000 | 180,000 |
What amount of rental income should appear in the company’s income statement for the year ended 30 April
2006?
Suggested solutions
| Rental Income | |||
| Rental in advance 06 | 990,000 | Rent | 4,050,000 |
| Rental in arrears 05 | 200,000 | Rental in advance 05 | 900,000 |
| Income Statement | 3,940,000 | Rental in arrears 06 | 180,000 |
| Total | 5,130,000 | Total | 5,130,000 |
Alternative solutions
RENT IN ADVANCE
| DEBIT | CREDIT | ||
| Rental in advance 05 | 900,000 | ||
| DIFFERENCE in advance | 90,000 | ||
| Rental in advance 06 | 990,000 |
RENT IN ARREARS
| DEBIT | CREDIT | ||
| Rental in arrears 05 | 200,000 | ||
| DIFFERENCE in arrears | 20,000 | ||
| Rental in arrears 06 | 180,000 |
RENTAL INCOME
| DEBIT | CREDIT | ||
| Rent received in 06 | 4,050,000 | ||
| DIFFERENCE in advance | 90,000 | ||
| DIFFERENCE in arrears | 20,000 | ||
| Answer | 3,940,000 |
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