wurrall 6/04

The interest payable is interest on the non-current liabilities (580 at 8%) plus the interest on the short term borrowings which is 7% (from note (g) in the question). So in the first year it is (580 x 8%) + (230 x 7%) = 62.5 (i.e. 63). In later years, because the short term borrowing increases, so too does the interest. Note (f) says that any changes in financing needs are met by adjusting the overdraft. When we prepare the SOFP each year, the overdraft is therefore the missing figure (balancing figure). Other payables are increasing in line with sales (note (d) in the question) and are therefore increasing at 8% next year, 7% the year after, and so on.

You are very welcome :-)