To determine the prepayment for Clifford's rent, we need to analyze the information provided and perform some calculations. Let's break it down step-by-step.
Step 1: Understand the Rent Payment Structure
Clifford pays rent of #200 per month. Therefore, over a year (which consists of 12 months), the total rent he should pay is calculated as follows:
[
\text{Total Annual Rent} = \text{Monthly Rent} \times \text{Number of Months}
]
[
\text{Total Annual Rent} = 200 \times 12 = 2400
]
Step 2: Compare Actual Payments to Expected Payments
Clifford has paid a total of #2,800 within the year. Now, we need to compare this amount to the total annual rent calculated in Step 1.
- Total Rent Due for the Year: #2,400
- Total Rent Paid by Clifford: #2,800
Step 3: Calculate the Prepayment
To find the prepayment, we need to determine how much Clifford has paid in excess of the total rent due. The prepayment is the amount that Clifford has paid beyond what he owes for the year.
[
\text{Prepayment} = \text{Total Rent Paid} - \text{Total Rent Due}
]
[
\text{Prepayment} = 2800 - 2400 = 400
]
Conclusion
Thus, the prepayment amount is #400. This means that Clifford has paid #400 more than what he was required to pay for the year, which is classified as a prepayment.
Explanation of Options
Now, let's evaluate the options provided:
-
A. #300: This is incorrect because it does not reflect the actual calculation of the prepayment. The prepayment calculated is #400, not #300.
-
B. #400: This is the correct answer. It accurately represents the excess payment made by Clifford over the total rent due for the year.
-
C. #600: This is incorrect. It suggests an even larger excess payment than what was calculated. The prepayment cannot exceed the difference between what was paid and what was due.
-
D. #200: This is also incorrect. It does not account for the total payments made by Clifford and misrepresents the prepayment amount.
Common Pitfalls
- Misunderstanding Prepayment: Students often confuse prepayment with other accounting concepts. Prepayment specifically refers to amounts paid in advance for expenses that will be incurred in future periods.
- Calculation Errors: Ensure that you carefully subtract the total rent due from the total rent paid to avoid miscalculating the prepayment.
Revision Summary
- Clifford's monthly rent is #200, leading to an annual total of #2,400.
- He paid #2,800 in total, resulting in a prepayment of #400.
- The correct answer is B. #400, as it reflects the excess payment made.
- Always double-check calculations to avoid common errors in determining prepayments.