O Level Accounting (7707)•7707/12/O/N/20
Explanation
Prepaid rent as a current asset Steps:
- Total period covered by $1000 rent: 1 July to 30 November, approximated as 6 months for equal monthly allocation.
- Monthly rent expense: 166.67.
- Period expired by 30 September: July to September (3 months), expensed amount $500.
- Unexpired portion: October to November (approx. 3 months), $500 recorded as prepaid rent (current asset).
Why C is correct:
- Under accrual accounting (matching principle), prepaid expenses benefiting future periods are current assets on the balance sheet.
Why the others are wrong:
- A: 500.
Final answer: C
Topic: Other payables and other receivables
Practice more O Level Accounting (7707) questions on mMCQ.me