Cash & Treasury - AAT Test 2

GeorgiaH

Can anyone show me how to work out the long-term loan please?

The answer is Cr 1,134,000

Thanks

GeorgiaH

@Irrorate Could you maybe help me with this please?

Mike Webster

@GeorgiaH

Total loan £1,260,000

Split thus:

Some of it will be repaid within the next year (Current liability of £126,000)

Note: I do not agree with the model answer for this part of the task of -£126,000 credit as this means that the liability is being reduced. to me, a liability is a positive figure just on the credit side. After all, you wouldn't debit the bank with +£126 and credit a loan with -£126 would you? I have asked for clarification on this.

The remainder will be repaid over the next 9 years (Non-current liability - Loan account - of £1,134,000

£126,000 + £1,134,000 = £1,260,000

Does this help?

Mike

Irrorate

As above:
Dr bank full amount £1,260,000
Cr current loan a/c £126,000 (10yr loan, £126kpa)
Cr L/T loan a/c £1,134.000

Interest is just there to throw you off in this particular question.

GeorgiaH

Ohh great thanks very much Mike & @Irrorate