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accrual

This topic has 2 replies, 2 voices, and was last updated 8 months ago by Nikitagarwal.

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October 21, 2021 at 4:50 pm #638727
Nikitagarwal
- Topics: 154
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Ques – Impairment of assets
The following trial balance relates to Hume at 30 June 20X7:
$ $
Revenue 390,000
Cost of sales 210,600
Distribution costs 6,800
Administration expenses 12,700
Loan interest paid 3,600
Property – cost 150,000
Property – depreciation at 1 July 20X6 38,400
Plant and equipment – cost 176,200
Plant and equipment –
depreciation at 1 July 20X6 48,600
Trade receivables 31,600
Inventory – 30 June 20X7 18,100
Bank 1,950
Trade payables 25,400
Ordinary shares $1 50,000
Share premium 9,000
12 % Loan note (issued 1 July 20X6) 40,000
Taxation 1,300
Retained earnings at 1 July 20X6 11,450
––––––– –––––––
612,850 612,850

Can you please calculate the finance cost here ?
I am unable to understand how did they get 1200 also included in it? instead tsnt 4800 should have been added ?
October 23, 2021 at 9:15 am #638851
P2-D2
Keymaster
- Topics: 4
- Replies: 6115
Hi,

The finance cost if 4,800 but given that 3,600 has already been paid then we need to accrue for the difference of 1,200 within the accounts. This will increase the finance cost from 3,600 to 4,800 and record an interest accrual in the SFP of 1,200.

Thanks
October 23, 2021 at 5:09 pm #638930
Nikitagarwal
- Topics: 154
- Replies: 146
Yeah it makes sense now.. Thank you Chris !
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