A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year. The rent was increased from $22,500 per year to $30,000 per year as from 1 October 20X4.
What rent expense and accrual should be included in the company’s financial statements for the year ended 31 January 20X5?
Answer
| $ | |
| February to March 20X4 (5,625 x 2/3) | 3,750 |
| April to June | 5,625 |
| July to September | 5,625 |
| October to December | 7,500 |
| January 20X5 (7,500 x 1/3) | 2,500 |
| Rent Expense for the year | 25,000 |
Accrual for Rental= 7,500 x 1/3 = 2,500