Accounting Multiple Choice Question – 20 December 2019

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Accounting

A firm which commenced business on 1 January 1994 rents the premises from which it operates. During 1995 the firm paid rent of £1,320.

This was 10% more than the total rent expense for 1994 – only half of which was paid by 31 December 1994.

If there is no accrual or prepayment in respect of rent at 31 December 1995, the rent expense for the year then ended is:

Select ONE answer:

  1. £600
  2. £720
  3. £1,200
  4. £1,320

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

  1. Not correct
  2. Correct
    £1,320 = 1994 expense + 10%.
    Therefore, 1994 expense = (£1,320/ 110 * 100) = £1,200.
    Only half of the 1994 expense (£600) was paid in 1994.
    Therefore, the other half (£600) was due at 1 January 1995.
    As there is no accrual or prepayment at 31 December 1995, the £1,320 paid has to be made up of the £600 in respect of 1994 and the balance – £720 – in respect of the full expense for 1995.
  3. Not correct
  4. Not correct

 

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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