[noorii]

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

[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

[noorii]

(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

[kallygirll]

(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