(6) (c) Tora Ltd prepaid rent of 2,100,000 for the premise on which it conducts...
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Accounting
(6) (c) Tora Ltd prepaid rent of 2,100,000 for the premise on which it conducts its business for a year. Endo Yamada, the manager of Tora Ltd, argues that the 2,100,000 prepaid rent should not be recorded in the financial statements because it has not yet been a full year. Therefore, Yamada decides to record the entire 42.100,000 in the financial statements at the end of the year after the business has used the premise for the whole year Required: (i) Discuss whether Yamada's decision of recording the entire 2,100,000 in the financial statements at the end of the year is correct. Justify your answer with the most adequate accounting concept. (3 marks) Discuss how should Yamada record the prepaid rent based on your answer in part (c)(i). You may wish to discuss which account (asset, liability or equity) the prepaid rent should be recorded in and how it should be recorded during the year. (10 marks) (Total for question 2: 25 marks)
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