Question

Kemp Co. must determine the December 31, year 2year-end accruals for advertising and rent expenses. A $500advertising bill was received January 7, year 3, comprisingcosts of $375 for advertisements in December year 2 issues,and $125 for advertisements in January year 3 issues of thenewspaper.A store lease, effective December 16, year 1, calls forfixed rent of $1,200 per month, payable one month from theeffective date and monthly thereafter. In addition, rent equalto 5% of net sales over $300,000 per calendar year is payableon January 31 of the following year. Net sales for year 2 were$550,000.In its December 31, year 2 balance sheet, Kemp shouldreport accrued liabilities ofa. $12,875b. $13,000c. $13,100d. $13,475

Answer 1

D. $13,475

Explanation:

Accrued liabilities are expenses that have been made but are not yet paid.

Incurred Advertising Bill (12-31-Y2) = $375

Half-Rent (12/31/Y2) = $600

Variable Rent (1/31/Y3) = $12,500

Total (12/31/Y2) accrued liabilities are $13,475