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Financial Accounting Past Paper Questions! PLEASE HELP!!

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    I have 2 multiple choice questions I just can't seem to get my head around.

    (viii) At 1 September, the administrative expenses account showed rates prepaid of
    £1,700 this represented a prepayment of four months. On the same date there was also an accrued office rent bill £500. During September administrative bills paid totalled £1,100. At 30 September there is a further outstanding administrative bill of £625.

    The amount to be shown in the income statement for administrative expenses for the MONTH of September is:

    a £1,650
    b £2,925
    c £625
    d £1,350

    I already know the answer is A, but I don't get how they got it.
    and also

    (xi) Betty bought a machine for £32,000 on 1 January 2008, which had an expected useful life of four years and an expected residual value of £4,000; the asset was depreciated on a monthly basis by the straight-line basis. On 31 December 2010, the machine was sold for £15,400.

    The amount to be entered in the income statement for the year end 31 December 2010 for profit or loss on disposal is:

    a Loss of £16,600
    b Loss of £5,600
    c Profit of £15,400
    d Profit of £4,400

    The answer is D, but I don't understand why.

    Any help will be much appreciated, and thanks in advance
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    With the second question:

    Total amount of dprn for the life of the vehicle:

    32000-4000 = 28000.
    From jan/08 to dec/10 is exactly 36 months which is basically 3 years.

    28 000/4 yrs = 7000 p.yr dprn
    but vehicle was used for exactly three years therefore total dprn:
    7000 * 3 = 21 000.

    So the NBV of the Asset is 32 000 - 21 000 = 11000.

    They sold it for 15 400 which is a profit of 4 400
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    (Original post by marvelboy18)
    With the second question:

    Total amount of dprn for the life of the vehicle:

    32000-4000 = 28000.
    From jan/08 to dec/10 is exactly 36 months which is basically 3 years.

    28 000/4 yrs = 7000 p.yr dprn
    but vehicle was used for exactly three years therefore total dprn:
    7000 * 3 = 21 000.

    So the NBV of the Asset is 32 000 - 21 000 = 11000.

    They sold it for 15 400 which is a profit of 4 400
    Thank you
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    (viii) At 1 September, the administrative expenses account showed rates prepaid of
    £1,700 this represented a prepayment of four months. On the same date there was also an accrued office rent bill £500. During September administrative bills paid totalled £1,100. At 30 September there is a further outstanding administrative bill of £625.

    The amount to be shown in the income statement for administrative expenses for the MONTH of September is:

    a £1,650
    b £2,925
    c £625
    d £1,350


    The prepayment of 1700 is for 4 months, so for 1 month, it will be 1700/4 = 425 and that is used during this month

    At the start of the month, 500 rent is due, and 1100 paid is not part of this month's expenses.

    1100 - 500 = 600 <-- Amount paid for this month.

    Further administrative bill of 625 is to be included in this month's expenses.

    so, 425 + 600 + 625 = 1650

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Updated: October 9, 2012
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