My issue is with the added interest of £80k in the answer. The question states 8% pa interest on the loan, the loan being £4m to buy the new machinery, with first interest payment due 11 September 2011. So why has the interest been added to statements ending 31 dec 2010 and how is 80k even calculated from 8% of £4m?
from further looking, I believe the statement 'payment due 11 september 2011' should be 2010 and 8% -> 2% being applied at Q4. 2% of £4m is the 80k needed. Any clarification would be appreciated still
Hi Corey Yes, looks like the £80k is 3 months of the 8% interest on the £4m loan. I'd say the 3 months of interest in respect of Oct/Nov/Dec 2010 is being included in the statements for year ending 21 Dec 2010 (even though payment only due on 30 Sept 2011) because of the accruals concept, ie include the interest that relates to 2010 even though the cashflow will only occur in 2011. Hope that clarifies ok. Best wishes Lynn
