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Hi mike, if you have access to the December 14 exam could you tell me on question 2 why the whole of the finance charge for the loan is deducted from retained earnings please? I’d have thought that it would only be the difference between the finance charge of 2610 and the amount paid 1800.
From his question, how can we tell that the 1800 is not already accounted for in retained earnings?
Many thanks
Is there a debit balance of $1,800 in the draft financial figures related to the loan interest? If there is, does that not indicate that, in arriving at $17,500, the debit figure for interest payable has not yet been charged as an expense against the year’s profits?
I don’t know – what do you think?
Yes there is a Dr balance.
Thanks Mike, I wouldn’t have ever got that without you pointing it out. I’ll look out for that trick in the future, many thanks
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