Oracle Planning 2017 Implementation Essentials — Question 46

You are using the Payables Deferred Expense feature (also known as Multiperiod Accounting). You have entered an invoice for a three-month lease that is entered on Jan 10th. The total expense is $12,000 and it covers the rental period from Jan 1st to mar 31st.
Assuming that the rental expenses are split evenly per month and a monthly accounting calendar is used, what would the accounting entry be?

Answer options

• A. On Jan 10th, Debit Prepaid Expense 12,000 and Credit Liability for 12,000 and then On Jan 31st, Debit Rental Expense for 4,000 and Credit Prepaid Expense for 4,000 On Feb 28st, Debit Rental Expense for 4,000 and Credit Prepaid Expense for 4,000 On Mar 31st, Debit Rental Expense for 4,000 and Credit Prepaid Expense for 4,000
• B. On Jan 10th, Debit Prepaid Expense 12,000 and Credit Liability for 12,000
• C. On Jan 31st, Debit Rental Expense for 4,000 and Credit Prepaid Expense for 4,000 On Feb 28st, Debit Rental Expense for 4,000 and Credit Prepaid Expense for 4,000
• D. On Mar 31st, Debit Rental Expense for 4,000 and Credit Prepaid Expense for 4,000

Correct answer: A

Explanation

The correct answer, A, details the complete accounting entries needed for the entire rental period, including the initial recognition and monthly expense allocations. Options B, C, and D do not provide the full sequence of entries required to accurately reflect the expense over the three-month period, missing either the initial entry or subsequent monthly allocations.