Question

Clare runs a florist and pays an annual premium to be part of the Interflora group. Her year end is 31st July. On 1st January 20X6 she paid her annual fee to Interflora of £1,600. On the 1st January 20X7 the fee for the year to Interflora had risen to £1,900. How much should be included in her accounts for 20X7 for the Interflora expense?

Answer 1

For the financial year 20X7, Clare should include an Interflora fee expense of £1,783.34, which is apportioned based on the relevant time periods covered by each annual fee paid.

Step-by-step explanation:

The calculation of the expense that should be included in Clare's accounts for Interflora for the year ending 31st July 20X7 will involve apportioning the annual fees between the two years based on the time each fee covers within the financial year. Clare pays the Interflora annual fee on 1st January each year, so for the year 20X7, we need to include the expense from 1st January 20X7 until 31st July 20X7 (7 months) from the £1,900 fee, as well as the expense from 1st August 20X6 to 31st December 20X6 (5 months) from the £1,600 fee paid on 1st January 20X6.

To calculate the expense for each portion:

• 20X6 portion (5/12 of £1,600): £666.67
• 20X7 portion (7/12 of £1,900): £1,116.67

So, Clare should include a total Interflora fee expense of £1,783.34 (£666.67 + £1,116.67) in her accounts for the year 20X7.