Hello,
In the Tadeon question (Y/e 30 Sept 2006),
"TB :
Loan int paid (Dr) $1000
2% Loan note (note(i)) (cr) $50000
Note (i):
The loan note was issued on 1 Oct 2005. It is redeemable on 30 Sept 2010 at a large premium (in order to compensate for the low nominal int rate). The Finance dept has calculated that the effective int rate on the loan is 5.5% p.a."
In the Kala Question (Y/e 31 Mar 2006):
"TB:
Loan int paid (Dr) $2000
8%(actual and effective) loan note (note(iii)) (Cr) $50,000
Note(iii):
The loan note was issued on 1 July 2005 with interest payable six monthly in arrears."
I did all the calculations for both questions correctly but in the answer to these questions, the Loan figure which goes to NCL for Tadeon is $51,750 ( includes the interest accrued) and the Loan figure which goes to NCL for Kala is $50,000 (excludes the interest accrued on NCL) , but the interest accrued then goes in Current Liabilities. Why is it so?
Ask the Tutor ACCA FR
Loan
Effective interest on the Tadeon loan is 5.5% and, on $50,000 that's an annual amount of $2,750.
We are told $1,000 is paid so the remaining $1,750 is rolled up into the loan to give us $51,750 to carry forward as a non-current liability
You knew all that!
Now for Kala
Effective interest on the Kala loan is 8%, the same as the coupon rate and, on $50,000 that's an annual amount of $4,000
We are told $2,000 is paid so the remaining $2,000 WILL be paid, in arrears, as per the question
I seem to remember that the Kala year end is 31 March so that $2,000 will be paid on 30 June, 3 months after the year end
We need therefore a current liability accrual of $1,000
The difference is because the actual and effective rates in Tadeon are different whereas the actual and effective rates in Kala are the same
OK?
Sign in to reply to this topic.