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Hi Chris,
Hope you are well!
Below is the question:
The following information has been extracted from the books of Picklette
for the year to 31 March 20X9.
$000 $000
Administrative expenses 170
Interest paid 5
Called up share capital
(ordinary shares of $1 each) 200
Dividend 6
Cash at bank and in hand 9
Income tax
(remaining balance from previous year) 10
Warranty provision 90
Distribution costs 240
Land and buildings:
at cost (Land $110,000, Buildings $100,000) 210
accumulated depreciation (at 1 April 20X8) 48
Plant and machinery:
at cost 125
accumulated depreciation (at 1 April 20X8) 75
Retained earnings (at 1 April 20X8) 270
10% Loan note (issued in 20X7) 80
Purchases 470
Sales 1,300
Inventory (at 1 April 20X8) 150
Trade payables 60
Trade receivables 728
––––– –––––
2,123 2,123
––––– –––––1) The 10% loan note was issued on 1 April 20X7 and is repayable five
years from that date.Now My question is for Finance cost we have to take 5 (already present in the question) and 80*10% = 8 so totaling to 8+5 = 13 right ?
however in book only 8 is given
can you please help me understand whyb) In SFP – trade payables – 60 + 3( accrued income ) is added how did we arrived at this amount ?
Hi,
a) the only interest bearing instrument in the SFP is the loan notes, so interest cannot come from anywhere else. Given this then the total interest on these loan notes to be accrued will be the 8 and so we need to increase the 5 already recorded/paid to the 8 total figure.
b) there isn’t any information within the question that points towards the accrued income of 3. Is there extra information from the question that is missing? We’d be looking for income earned but not yet invoiced.
Thanks
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