O Level Accounting (7707)•7707/12/M/J/25
Explanation
Adjust for prepaid rent to find cash received Steps:
- Monthly rent = 510.
- Initial 2 months prepaid covers first 2 months of the year.
- During year, payments cover remaining 10 months plus 3 months prepaid at end.
- Total cash received = 13 months × 6630.
Why C is correct:
- Cash inflow = annual rent + net prepaid increase (3 - 2 months), or 12 × 510 = $6630.
Why the others are wrong:
- A: Understates by ignoring end prepaid; equals only 7 months.
- B: Equals annual rent minus 3 months; ignores initial prepaid benefit.
- D: Overstates by adding extra months; equals 17 months' rent.
Final answer: C
Topic: Other payables and other receivables
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