Question

Ina Co. had the following beginning and ending balances in its prepaid expenses 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?

Answer 1

Answer:

Operating Expenses of Current Year = $107,000

Explanation:

Provided Prepaid expenses opening = $5,000

This means this was part of current year operating expense therefore, this will be added back, to operating expenses.

Prepaid Expenses closing = $10,000

This is not part of current year expense, therefore this will be deducted, from current year operating expense.

Accrued Liability Opening = $8,000

This was liability for past year therefore will not form part of current year, and will be deducted from current operating expenses.

Accrued Liability Closing = $20,000

This is part of current year liabilities for operating expense, and thus form part of current year expense, therefore, will be added.

Net Effects of above transactions:

Operating Expense = $100,000

Add: Opening Prepaid = $5,000

Less: Closing Prepaid = ($10,000)

Less: Accrued Liability Opening = ($8,000)

Add: Accrued Liability Closing = $20,000

Operating Expenses of Current Year = $107,000