A business compiling its financial statements for the year to 31 January each year pays rent quarterly in advance on 1 January, 1 April, 1 July and
1 October each year. After remaining unchanged for some years, the rent was increased from $6,000 per year to $7,500 per year as from 1 July 20X3.
Which of the following figures is the rent expense which should appear in the statement of profit or loss for year ended 31 January 20X4?
Answer
5 months/12 months x $6,000 = $2,500
7 months/12 months x $7,500 = $4,375
Total rent: $2,500 + $4,375 = $6,875