i'm working on a cash budget past exam paper and i don't know why the answer in the "bank loan interest" column for each of the 3 months (july, aug, sep) is £86. Could anyone please tell me how £86 is calculated?
thanks very much.
A bank loan of £12,960 has been negotiated and this will be paid into the business bank account in july.
The principle capital element of the bank loan (£12,960) is to be repaid in 36 equal monthly instalments beginning in August.
The loan attracts 8% interest per annum calculated on the amount of the loan principle advanced in july. The annual interest charge is to be paid in equal monthly instalments.
The calculation for simple interest (which in the real world is never, ever the way one calculates interest) is :
Advance + (period * interest rate * Advance)
So in this instance £12960+(3*.08*12960) = £16,070.40
Then take out the capital (16070.40 -12960 = 3110.40)
Then to calculate each month just divide 3110.40 by 36 which equals £86.40
hope that helps until someone comes up with a better answer,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Still £86.40 though... Not really the profession for calculations based on there or thereabouts no matter how you get to the result...
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I take it the bank wouldn't write off the 40p every month for 36 months then?
They would take your first born child and a couple of limbs at least for a fortieth of that!!!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
In the ACCA studies it really get's to me when one is expected to round to the nearest thousand, ten thousand, million, etc. As in the day job the calculations are to either 8 or 16 decimal places depending on the required precision (And the numbers that we're talking about are huge).
My first few ACCA exams I invariably had to correct my exam answers to make them less precise but still left enough of the original answer visible that the examiner knew that I had calculated to the penny even if the final answer was to the nearest 100k.
Right, I'll just stand in this corner and write out the word "Materialarity" a thousand times...
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Makes me wonder though, why the percentages required to pass exams are as they are when as you said yourself, we deal in accuracy (or are required to be damn accurate) I'm not complaining though.
