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Hi John,
On the above question, we’ve been asked to forecast the P/L and balance sheet. As per the question, the short-term borrowing will be the balancing figure. However, I cannot get the balancing figure until I have the reserves for the year, and I cannot have the reserves amount until i have the profit for the year. And to arrive at the profit, I need to know the net interest payable for which i need to know the short-term loan amount(which is the balancing figure) to consider its interest.
I don’t know if i am missing anything on the question, could you please help me on this?
Thank you.
@anoopej thank you for the answer 🙂
Thanks John for confirming.
I don’t know what has happened to anoopej’s comment 🙂
Note (vi) says that interest is effective in the following year.
So the interest payable each year is based on the amount owing at the end of the previous year.
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