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In: Accounting

On 30 June 2018, Exegol Ltd borrowed $400,000 as an interest-only loan at 10% for 5...

On 30 June 2018, Exegol Ltd borrowed $400,000 as an interest-only loan at 10% for 5 years.

In relation to this loan, state the amount that would be reported in the Statement of financial position on 30 June 2022 as a current liability.

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Expert Solution

Interest-only Loan: In this type of loan borrowing only interest is paid in life of the loan and principal value is paid only after the expiry of loan.
For Borrowing of Loan below entry is passed,

Cash              Dr. $ 400,000

Bank Loan    Cr. $ 400,000

Annual interest expenses is paid in cash = $ 400,000 X 10% = $ 40,000 per year.

There is no repayment of principal value during the life time of loan so the outstanding of loan is always $ 400,000.

So at the end of the year as on 30 June 2022 there is no payment of loan principal so amount due as on this date is $ 400,000.

Current portion of due from non-current liability is classified as on current liability. So as on 30th June 2022 no amount is due so none of the amount from borrowed is classified as current liability

Answer = Amount reported in financial statement as current liability is $ Nil

ekkarill92 answered 2 years ago
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