Business Transactions Solutions


A company has applied for a bank loan on February 04, 2009. It was approved on March 03 of the same year, but the proceeds of such loan were credited to the company's bank account only on may 01. the loan was payable in four equal annual installments of 500,000 starting June 01,2010. It also incurs interest at half of 1% every month (based on the total principal) starting may 01, 2009. The interest is payable at the same time as the annual installments  The company's operations are based on a calendar year.

1. If the financial statements were to be prepared for the year 2009, what amount would appear as interest expense in the entity's statements of income and expenses?

2. Using the information in no.1 what would appear as non-current portion of the loan payable account for a statement of financial position prepared as of December 31, 2009?

Following questions are not related to above statement.

3. A company had total assets of 1,500,000 as of January 01, 2010. For the year 2010, its liabilities have increase by 400,000, its owner invested an additional 100,000 and withdrew 50,000 and it had a net loss at 230,000. As of December 31, 2010, it must have had total assets equal to?

4. A company's statement of changes in owner's equity showed a beginning balance of 250,000, an additional investments of 30,000, a withdrawal of 40,000, and an ending balance of 225,000. The company's results of operations for the year must have been?

Miko De Leon From Philippines

Miko De Leon, I am trying to solve your accounting questions one by one.

1.Financial year had not been mentioned in this question. So, suppose, company closes its accounts on the end of 31st Dec. 2009. So, if half of  1% interest is of end of every month. 8  month interest will be outstanding and will be shown in the expenses side of income and expense statement.

Total Loan = 5,00,000 X 4 = 20,00,000

8 Months Interest Outstanding = 20,00,000 X 0.5% X 8 =  80,000

2. We show 15,00,000 as non current liability and 5,00,000 as Current liability in the balance sheet of a company.

3.  Ans. 17,20,000

Given total assets = total liabilities

+New investment = +fresh capital increase

-Cash decrease with Withdraw = -Decrease in Capital

- Assets Decreased due to Net Loss = - Decrease in Capital due to loss

4. Net Loss = 15000

Beginning of Capital +Fresh Capital - Drawing - Ending balance of Capital

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