A company has occupied rented premises for some years, paying an annual rent of $120,000. From 1 April 2006
the rent was increased to $144,000 per year. Rent is paid quarterly in advance on 1 January, 1 April, 1 July and
1 October each year.
What figures should appear for rent in the company’s financial statements for the year ended 30 November
2006?
                                                      Income statement                 Balance sheet
                                                                 $                                           $
A                                                          136,000            repayment   12,000
B                                                          136,000            repayment    24,000
C                                                          138,000            Nil
D                                                          136,000            Accrual           12,000

A (4 x 10,000) + (8 x 12,000) = 136,000; 1/12 x 144,000 = 12,000