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ACCA Applied Knowledge · Financial Accounting · The main elements of financial statements

Darien Co has a $400,000 loan. At 31 December Year 5 the repayment schedule requires $100,000 to be repaid on 30 June Year 6 and $100,000 on 30 June in each of Years 7, 8 and 9. Interest is paid separately and is up to date. How should the loan be presented at 31 December Year 5?

The loan is split between $100,000 current and $300,000 non-current. Only the instalment due by 30 June Year 6, within twelve months of the reporting date, is a current liability; the later instalments are due after more than one year and are non-current.

  1. ACurrent liability $400,000
  2. BCurrent liability $100,000 and non-current liability $300,000Correct
  3. CCurrent liability $200,000 and non-current liability $200,000
  4. DNon-current liability $400,000

Explanation

Only the portion due within 12 months of the reporting date, the $100,000 due on 30 June Year 6, is current. The remaining $300,000 is due after more than 12 months and is non-current. Showing $200,000 as current wrongly includes the Year 7 repayment, which falls on 30 June Year 7, over 12 months away.

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