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I have a question regarding the chapter “provision and liability”…..the problem says”in january 2004,sarah took out a bank loan of $30000.This is to be repaid in three equal annual instalments.The first instalment is due for the payment on 1 jan 2005.How will the outstanding balance be reported in Sarah’s statement of financial position at 30 sep 2004?”…..the answer is $10000 as a current liability and $20000 as a fixed liability…can anyone plz explain it to me that why this is the answer?
The loan will be repaid as follows:
1/1/2005 10,000, 1/1/2006 10,000 and 1/1/2007 10,000
Therefore on 30/9/2004
Instalment 1 is 3 months away, so a current liability as <12 months.
Instalments 2 and 3 are 15 and 27 months away so a long term liability as >12 months. [The term ‘fixed liability’ is unusual]
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