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7 February, 16:35

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?

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  1. 7 February, 19:12
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    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
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