reporting loans

[splash.of.colour]

hi guys, i need some help

if the question says "quarterly loan repayments of $1500 includes $300 interest" ..... when preparing the balance sheet, would you include the interest as part of the "loan" liability?

For current liabiities i said the loan was $4800 ... (1500-300) x 4
But the answer just says $6000.
Why do you leave the interest innnnnn?

[RTandon]

Correct me if I'm wrong, but doesn't the interest go in the expenses?
Therefore it is put in the profit and loss statement and the profit (or loss) is put under owner's equity.

[abcdqdxD]

This is an interesting question. Common sense would say that the liability would be the principal amount of the loan. But if you think about it.. for an item to be a current liability means it must result in an outflow of economic benefit within 12 months, which is true for the case of interest expense incurred. So from that interpretation I guess I would include it in current liabilities.

[bucklr]

This is an interesting question. Common sense would say that the liability would be the principal amount of the loan. But if you think about it.. for an item to be a current liability means it must result in an outflow of economic benefit within 12 months, which is true for the case of interest expense incurred. So from that interpretation I guess I would include it in current liabilities.

I think i disagree,
Interest expense is created in the period which it is incurred. so only unless its accrued would interest be recorded in a balance sheet.
I think the answers are wrong.

[abcdqdxD]

Hmm that's a good point. My first response was that I would not include it as CL, but I guess it depends on how you interpret the question.

[splash.of.colour]

thankyou all for the quick responses, im glad i wasnt the only one confused by that question lol, i wont stress over figuring it out then. it was in the Neap smartstudy book if anyone happens to come across it thanks again!

[sam.utute]

This is an interesting question. Common sense would say that the liability would be the principal amount of the loan. But if you think about it.. for an item to be a current liability means it must result in an outflow of economic benefit within 12 months, which is true for the case of interest expense incurred. So from that interpretation I guess I would include it in current liabilities.

I think i disagree,
Interest expense is created in the period which it is incurred. so only unless its accrued would interest be recorded in a balance sheet.
I think the answers are wrong.

I agree with Bucklr. Basically, if it indicates that the interest has been accrued, it can be classified as a current liability. Otherwise, as per normal, interest expense is dealt with in the Income Statement, not the Balance Sheet.

[splash.of.colour]

okay that makes sense, thanks

one more question!!
on the 2010 vcaa exam, the very last question, a sales invoice was recorded in the general journal...why?
i understood that the prepaid sales would need to be debited and sales credited, but why was the additional amount recorded in the general journal? ... no sales journal was provided. 

[abcdqdxD]

New study design states it can only be recorded through the general journal AND sales journal. This was not the case in 2010

[splash.of.colour]

oh really? thats interesting. i should go have a better look at the study design by the sounds of it! lol thankyou again

[sam.utute]

There's a really good document that explains all of the changes to the study design available on the VCAA website. I highly recommend everyone reads it.

[splash.of.colour]

okay will do thanks

now sorry to bother everyone, but i keep stumbling across more questions lol. This relates to the reducing balance method of depreciation.

Question: Calulate the accumulated depreciation of the cash register at Septrember 30 2012
Details:
-  Cash register was purchased on 1 october 2099 for $3300 (not including GST)
- Cash register is depreciated at 20% per annum using the reducing balance method
 
what i dont understand is whether you are supposed to...

• calculate one years worth of depreciation from 1 October 2009 – 30 September 2010 (so 20% x 3300 = $660) and then continue on from there…
• or calculate depreciation for 1 October 2009 – 31 December 2010 (0.2 x 3300)/4 and then go on from there...

the question didnt say how long the businesses reporting period is :/

[link125]

What was the answer?

I got 1610.40

[abcdqdxD]

same

[splash.of.colour]

yeah that was the answer