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Dear John,
In BPP KIT question 46. AIR. Please explain how they calculate the Total debt at end of year of 28000, 26000, and 24000 for gearing ratio?
Secoundly please explain why the reserves b/f and c/f. If there is no reserves then 0 why they use profit after tax and c/f to next year ?
The question says that the amount from AV will be repaid in equal instalments. Since the amount borrowed is 10M they will repay 2M a year which reduced the amount of debt owing.
With regard to reserves, then every year the retained profit after tax serves to increase the reserves – this is financial accounts 🙂
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