Current portion of long term loan - confused!
Kwilb
Registered Posts: 4
Hello,
When asked to fill in missing information in the extract of the trial balance I am confused by the Current portion of long term loan. It is in the mock assessment (Sample CBT 2) on the AAT website. Here is the question
A company's year-end is 31st December 20X6
A 10 year bank loan was taken on 30th June 20X5. The principal amount is £1,260,000 and is being repaid in equal monthly installments.
What is the Current portion of long term loan as at 31st December 20X5?
The answer says £126,000 but in a similar question in my workbook our tutor says we should only account for 6 month so that would be £63,000 ??? Is the answer from AAT wrong, should it only be £63,000 or did my tutor make a mistake? I'm really confused but want to get it right on the day of my exam next Thursday!
Many thanks to all!
Kwilb
When asked to fill in missing information in the extract of the trial balance I am confused by the Current portion of long term loan. It is in the mock assessment (Sample CBT 2) on the AAT website. Here is the question
A company's year-end is 31st December 20X6
A 10 year bank loan was taken on 30th June 20X5. The principal amount is £1,260,000 and is being repaid in equal monthly installments.
What is the Current portion of long term loan as at 31st December 20X5?
The answer says £126,000 but in a similar question in my workbook our tutor says we should only account for 6 month so that would be £63,000 ??? Is the answer from AAT wrong, should it only be £63,000 or did my tutor make a mistake? I'm really confused but want to get it right on the day of my exam next Thursday!
Many thanks to all!
Kwilb
0
Comments
-
Hmm, I would've gone with your tutor on this one - as far as I see, the current portion is the amount of the principal that would be paid off in the current accounting period, which would be £63,000.
But to be honest, you've got me wondering now too... xDAccounts Executive, ғɪᴀʙ ᴍᴀᴀᴛ
QBO & Xero certified advisor
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F8 Audit and Assurance - 2 Mar 20200 -
I think the 6 months repayment may only need to be taken into account in the Long term loan (just under Current portion of long term loan in the TB)
So maybe the AAT answers are correct after all... but still a bit confused about what my tutor said. See below.
Current portion of long term loan as at 31st December 20X5 = £126,000
Long term loan = £126,000 / 2 = 63,000
1,134,000 (126,000 x 9 years) - 63,000 = 1,071,0000 -
The current portion of the long-term loan used to be included under "creditors: amounts falling due within one year" under old UK GAAP. It is the amount due within one year of the end of the reporting period, which is £126,000.0
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Current portion of long-term loan = 1 year of the loan 126,000
Long-term loan = monthly payments are 1,260,000/120 = 10,500
At the end of 20X5 6 months will have been paid so 10,500 x 6 = 63,000, then 1,260,000 – 63,000 = 1,197,000
Out of this 126,000 is due within the 12 months so take 1,197,000 – 126,000 = 1,071,000 due within more than a year
For 20X6 take the 1,071,000 – 126,000 = 945,000
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