I don't get the answer to this. Prepaid expense is an asset account. Therefor, the operating expenses would not have been debited when cash was paid to increase the prepaid account. This entry requires no adjustment to an accrual operating expense account?? (I get the adjustment for liabilities accrued).
Question #30 (AICPA.130726FAR)
Ina Co. had the following beginning and ending balances in its prepaid expense and accrued liabilities accounts for the current year:
Prepaid expenses Accrued liabilities
Beginning balance $ 5,000 $ 8,000
Ending balance 10,000 20,000
Debits to operating expenses totaled $100,000. What amount did Ina pay for operating expenses during the current year?
A. $ 83,000
An increase in prepaid expenses indicates that more cash was paid than expensed (5,000). An increase in accrued liabilities indicates that more expense was accrued than paid (12,000). The reconciliation of operating expense to cash paid is: 100,000 + 5,000 – 12,000 = 93,000.
B. $ 93,000
An increase in prepaid expenses indicates that more cash was paid than expensed (5,000). An increase in accrued liabilities indicates that more expense was accrued than paid (12,000). The reconciliation of operating expense to cash paid is: 100,000 + 5,000 – 12,000 = 93,000.
C. $107,000
D. $117,000
BEC - Passed
AUD - Passed
FAR - 10/28/14 (waiting results)
REG - Passed
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