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Dear Jill,
Please consider the extract below and answer the question that follows
(Reference: Example 2, Technical Article – Benefits, ACCA).THE EXTRACT
Ming was provided with an interest-free loan of £120,000 on 1 May 2023 so that she could purchase an holiday cottage. Ming repaid £50,000 of the loan on 31 July 2023, and repaid the balance of the loan of £70,000 on 31 December 2023.THE QUESTION
Using the average method, what is the closing balance outstanding of the loan?PLEASE NOTE
The answer in the article says the closing outstanding balance is £70,000, but I doubt it because there was no OUTSTANDING amount on 31 December 2023 because Ming repaid the loan in FULL on that date.Please help clarify this for me, Jill.
In order to stop someone borrowing money after April and repaying it before March so that the amount outstanding on 6/4 and 5/4 are both nil (and therefore no loan bik) you use the amount at the begining of the loan and the end of the loan to work out the BIK
The answer should be – 120 +70/2Sorry I was unable to answer this earlier, Jill.
The exam was not bad, but I encountered some challenges due to subtle differences in the function of the spreadsheet.
The spreadsheet for the exam and the one provided for the CBE Practice Platform are not exactly the same.
But I’ve learnt my lesson.
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