Question

Torpedo Co took out a bank loan on 1 April 20X0 for $10,000. It is due...

Torpedo Co took out a bank loan on 1 April 20X0 for $10,000. It is due to be paid back in equal monthly instalments of $250, starting on 1 May 20X0. How should Torpedo Co include the loan in its statement of financial position at 30 June 20X0?

A non-current liability of $9,500

A current liability of $3,000 and a non-current liability of $7,000

A non-current liability of $10,000

A current liability of $3,000 and a non-current liability of $6,500

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Answer #1

Answer

OPTION D i.e. A current liability of $3,000 and a non-current liability of $6,500

Explanation:

Current Liability is a liability to be paid within 12 months.

Non-Current Liability is a liability to be paid after12 months.

Total installments = 10,000 / 250 = 40

Installments before  30 June 20X0 = 2

Installments within 1 year = 12. So, Current liabilities = 12*250= $ 3,000

Installments within 1 year = 40 - 2 - 12 = 26. So, Non-Current liabilities = 26*250= $ 6,500

Clearly, option d is correct and other options are incorrect.

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