RULE: An accruable expense is one is which the services have been
received/performed but have not been paid for by the end of the reporting
period.
Choice "c" is correct. The facts indicate that a repair was completed prior
to year end but not yet invoiced. If it has not yet been invoiced, it is assumed
that it has also not yet been paid for. Therefore, this is a situation in which
the repair expense would be accrued at year end. Services have been performed,
but they have not been paid for, as they have not even been invoiced
yet.
Choice "d" is incorrect. If the repair was completed after year end, then the
expense is not accruable, as the benefit of the services hasn't been received as
of year end. The fact that the repair was invoiced prior to year end does not
impact the situation.
Choice "a" is incorrect. If a repair was completed and paid for prior to year
end, no accrual is appropriate. On the accrual basis, the expense is taken in
the year the repair is completed and the benefit is received. In this case, the
account payable was also paid in the same year, but this has no effect on the
expense.
Choice "b" is incorrect. The facts indicate that the work is to be completed
at a date later than year end. Therefore, the expense is not accruable at year
end, as the benefit of the repair hasn't been received as of year end. It is
reasonable that a signed contract for the repair work exists, but this has no
effect on the accrual.
