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- November 14, 2017 at 7:27 pm #415789
Trial balance as at 30 September 2017
bank loan (6% interest p.a) 1200 000 (Cr side)
bank interest paid – 36000 (Dr side)Additional information:
The bank loan was taken out in September 2010, in April 2018 170 000 will be repaid and the remainder of the loan is to be repaid in August 2030.(interest rates are quoted as annual percentages )
I have to record the journal entries and reflect it on financial statements.
So I confused because in the example we worked on in class, it was assumed that the loan was taken before the start of the year so we charged only one year of interest and noted the loan (separately from the interest) on statement of financial performance as at 30 September 2017 with the amount that was noted on trial balance even though the loan was repayable on 2020 (that is not about the question i have written above, this one was the class example).
And now, in this question the loan was taken out 2010 so I do not know if they have noted the interest in the financial statements of previous years. No information is given about that. So do I have to find annual interest as 1200 000 x 0.06 = 72 000 and multiply it by 7 as it has been 7 years that the loan has been taken? And the bank loan itself, 170 000 is repayable on 1 April 2018, so do I have to calculate the part which is the proportion due to 30 September 2017 from that or simply note the full loan of 1200 000? And if I have to find the portion for then year ended 30 September 2017, will it affect the interest I have calculated above?
(Thanks in advance )
November 15, 2017 at 9:23 am #415887You would always assume that the interest in previous years has been paid.
The interest expense for 2017 is 6% x 1,200,000 = 72,000.
Only 36,000 has been paid and so the remaining 36,000 will appear as a current liability in the SOFP.For the loan itself, 170,000 will appear in the SOFP as a current liability and the remainder will appear as a non-current liability.
Are you watching our free lectures? They are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
November 15, 2017 at 12:10 pm #415950Thank you so much
November 15, 2017 at 2:30 pm #415971You are welcome 🙂
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