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The following information is available about Andrews business at 30 Sept 2006:
Loan (repayable in 4 equal annual installments starting 1 January 2007)- $100,000
My question for u is how does the above line involves a loan amount onto the current Assets in the SOFP?
They are actually asking the current assets amount?
Can u pls explain me How loan amount comes into Current Assets?Firstly, it is nothing to do with current assets. A loan is a liability – not an asset!
Secondly, have you really been watching the lectures? If you have then you will know that if an amount is payable within 1 year then it is a current liability, if it is more than one year then it is a non-current liability.
If part is payable within 1 year, then that part is current. If part is payable in more than one year, then that part of non-current.
Dear Mr. Moffat, in the above, one year from the reporting date is 30th Sep 200×7. Therefore after the reporting date 3 of 25K instalments are falling due. I.e, 1/1/x7, 1/5/x7, 1/9/x7. Is it correct to take 75K as current liability on the loan and balance 25K as long term? Look forward for your kind assistance.
Regards
Mathews.
The first line of the question gives the date as 30 Sept 2006.
As at 30 Sept 2006, payable within 1 year is 25,000, and so 25,000 is a current liability.
The remaining three payments are more that 1 year from 30 Sept 2006, and therefore 75,000 is a long-term liability.
Thank you Sir, guess I mis-red as four “quarterly” payments instead of annual. Careless of me. Thank you for assisting me.
Regards
Mathews
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