Expense and Accrual for Rental ( video below)

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

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