Question
Ashworth Distribution prepares its financial statements to December 31, 2026; they are authorised for issue on March 5, 2027. Its liabilities at the year end are:
- A bank loan of $500,000, repayable in five equal annual instalments of $100,000, the next on June 30, 2027.
- Trade payables of $85,000.
- A loan note of $200,000 due for repayment on March 31, 2027. On February 10, 2027 Ashworth agreed with the lender to replace it with a new five-year loan. At December 31, 2026 Ashworth had no right to roll the note over.
- A warranty provision of $30,000, of which $12,000 is expected to be settled within twelve months.
- A deferred tax liability of $40,000.
Required:
- Current Liabilities — total current liabilities at December 31, 2026.
- Non-current Liabilities — total non-current liabilities at December 31, 2026.
- The Loan Note — why the loan note is classified the way it is.
Statements in this challenge
- Current LiabilitiesNumeric Answer
- Non-current LiabilitiesNumeric Answer
- The Loan NoteMCQ Quiz
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 — current/non-current distinction
Every asset and liability is classified current or non-current on the basis of the operating cycle and the twelve-month test. Work down the trial balance classifying each item first, and total only once the classification is settled.
Common mistakes
- Leaving the current portion of a long-term borrowing inside non-current liabilities.
- Classifying a prepayment covering more than a year entirely as current.
- Reporting an asset at gross amount where a contra account should reduce it.
Further readingPreparing a balance sheet step by step