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JAMB Principles of Accounts 1997 Question 14

Question 14

Accruals and Prepayments

Use the information below to answer questions 14 and 15.
On 30/5/93 Tolu & Co. paid 2 years rent of ₦50 000 which was debited to the rent account.
At 31/12/93, what portion of that amount was prepaid?

  1. A.₦14 583
  2. B.₦25 000
  3. C.₦35 417
  4. D.₦37 415
Show the answer and explanation

Answer: C (₦35 417)

Explanation

Rent per month = 50 000 ÷ 24. June to December 1993 uses 7 months, so 17 months are prepaid: 17/24 × 50 000 = ₦35 417.