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The interest payable of 7000 is in respect of the company’s 4% loan notes which were issued on 1 july 2021. Interest of 6000 was paid on 31 december 2021 with an accrual of 1000 provided ffor at 31 january 2022. The loan notes were issued in order to finance the company’s trading activities.
I think the interest payable or finance costs have been calculated by adding 6000 and 1000 but I don’t understand why these two have been addedThey have paid 6,000 for the six months from 1 July 2021 to 31 December 2021.
They still owe 1,000 as at 31 January 2022.Therefore the total expense for the year ended 31 January 2022 is 7,000.
At the beginning of the year, the allowance for receivables was $850. At the year end, the allowance required was $1000. During the year $500 of debts were written off, which includes $100 previously included in the allowance for receivables.
What is the charge to statement of profit or loss for receivables expense for the year?
? $1,500
? $1,000
? $650 (the choice of the kit book)
? $550I chose ? $550, and I took the assumption that irrecoverable debts written off were included $100 previously included in allowance.
So please help me why the are ignoring that assumption?
In future you must start a new thread when you are asking about a different topic – this has nothing to do with interest paid!
They are not ignoring your assumption. There are two ways of arriving at the same answer (and either way is fine for the exam).
Doing it the way you want to, the new irrecoverable debt is 400. For the other 100 the allowance is no longer needed which reduces the allowance to 750. They want an allowance of 1,000 so the cost of increasing it is 1,000 – 750 = 250.
Therefore the total expense is 400 + 250 = $650.The other way (and much quicker and easier) is simply to say that the irrecoverable debts are 500 and the cost of increasing the allowance from 850 to 1,000 = 150. Therefore the total expense is 500 + 150 = 650.
Again, either way is fine in the exam and both always give the same result.
Have you watched my free lectures on this, because I do explain this in the lectures. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Hi,
I have a query. Can MBA degree holder sign off your performance objectives?
Regards,
WaqasPlease ask in the general ACCA forum – not under posts about technical queries on Paper FA.
The interest payment on 31 december 2021 of 6000 could be for july only. The question does not mention that the payment relates to the period july to december. So how could this be assumed
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