At 30 September 20X8, the following require items inclusion in MCD Co’s financial
statements:
(1) On 1 September 20X8, MCD Co received $5,000 as a deposit for goods which were
despatched to the customer on 15 October 20X8.
(2) On 1 August 20X8, MCD Co paid an insurance premium of $5,000 for the six month
period commencing 1 July 20X8.
(3) On 1 April 20X8, MCD Co raised a five?year bank loan of $12,000 which is repayable in
a single capitalsum at the end of the loan term. Interest is payable on the loan annually
in arrears at 5% per annum.
For these items, what wasthe effect of these transactionstotal figuresincluded in the MCD
Co’s statement of financial position at 30 September 20X8?
A Current assets $17,000 Current liabilities $2,800
B Current assets $19,500 Current liabilities $10,300
C Current assets $14,500 Current liabilities $5,300
D Current assets $7,500 Current liabilities $5,300
Please explain sir
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4y ago#1Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers - they have answers and explanations :-)
(1) Is a current liability of $5,000 because the customer has paid a deposit for goods that have not yet been delivered.
(2) is a current asset of $2,500 because there is a prepayment of 3/6 x $5,000.
(3) The loan itself is a non-current liability. However the is a current asset of the $12,000 cash received, and a current liability of the interest owing of 6/12 x 5% x $12,000.
Have you watched my free lectures? They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
Sir,
3) the answer given posted the 12k usd loan under current asset.
May I know why the 12k usd loan is posted under the current asset and not under liability? Sorry if you have covered in your lectures but i could not recall.
4y ago#3This is exactly what I explained in my previous reply!!!
The loan is a non-current liability (and so is not a current liability).
The cash they have borrowed is a current asset.
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