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Hi Sir, I am attempting Q.3 of kaplan kit ( wurrall llc) there are no detailed working given for this question.
Would you please tell me how they have computed the interest payable.
ThanksThe interest is the total of 8% on the long term borrowing plus 7% on the overdraft borrowing.
It is calculated each year on the balances at the end of the previous year.John,
Cuold you explain this in a different way or write the working to get 20X6 interest figure? I understand the 63 for the first year, but I can’t follow the other calculations.
The interest on the long-term borrowing is the same each year at 580 x 8% = 46.4
The interest on the short-term borrowings is at 7% (per the question) on the balance at the start of each year.
So in the first year it is 7% x 230 = 16.1. So the total interest is 46.4 + 16.1 = 62.5
In the second year it is 7% x 266 = 18.62. So the total interest is 46.4 + 18.62 = 65.02
In the third year it is 7% x 287 = 20.09. So the total interest is 46.4 + 20.09 = 66.49
And in the fourth year it is 7% x 332 = 23.24. So the total interest is 46.4 + 23.24 = 69.64
Thank you very much for your reply.
The short term borrowing balance on the second year, 266, how do we reach this figure?
This is what is throwing me off as I’ve tried several different alternatives and I can’t reach it :/
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