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Accounting Equation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Accounting Equation

  • This topic has 3 replies, 3 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 18, 2021 at 9:03 am #635941
    accachandrakant
    Participant
    • Topics: 1
    • Replies: 0
    • ☆

    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

    September 18, 2021 at 11:10 am #635952
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    Why 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.

    April 24, 2022 at 8:00 am #654341
    AbrahamChinYuan
    Participant
    • Topics: 22
    • Replies: 22
    • ☆

    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.

    April 24, 2022 at 6:50 pm #654367
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    This 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.

  • Author
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