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Hello. I have taken the following from the Kaplan consolidation test (section B). I am not going to post the entire question here but only the parts relating to the loan as I do not understand how the loan interest accrual had been calculated:
An entity, Magnum Co, prepared a trial balance at 31 March 20X1 as follows:
“7% bank loan 20X5 26000”
The bank loan was taken out on 1 October 20X0 and is repayable in 20X5.From the above information, can you please help me understand why the SOPL shows finance costs of $910 but the SOFP shows interest accrual of only half the amount which is $455?
Isn’t the finance cost for the year supposed to be equal to the loan interest accrual?
In the SOPL we show the expense for the period. They have had the loan for 6 months (1 October to 31 March) and therefore the expense is 6/12 x 7% x 26,000 = €910.
I do not know why the accrual is 455. I can only imagine that they were paying interest at the end of each calendar year and therefore were still owing for the three months from 1 January to 31 March. However I do not have the Kaplan books and so I cannot check the wording.
Oh ok, it could be that way too, however, they did not specify anything as such in the question. That was the only information given relating to the loan.
Anyway, thanks a lot.
2. The annual sales by an enterprise were $235,000 including sales tax at 17.5 per cent. Half of the sales were on credit terms, and the remainder on a cash basis. The trade receivables in the statement of financial position were $23,500.
What were the average receivables collection period (to the nearest day)?
A37 days
B43 days
C73 days
D86 daysCan you please help me with this qn as well? How is the answer A? In the answers, the working showed that we take BOTH receivables and credit sales including sales tax.
In future please start a new thread when you are asking about a different topic.
The sales in this question include sales tax, because the question says so.
The receivables must automatically include sales tax because this is the amount that is owing by the customer (as shown in my free lectures on sales tax).
Ok, so if we take receivables including sales tax so we should also take sales including sales tax?
For the purpose of calculating the collection period, yes. Otherwise it would not be sensible.
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