Liability classification for long-term loan and accrued interest

Steps:

• Classify the $30,000 principal as non-current liability since repayment is due in 10 years, beyond 12 months from 30 April 2018.
• Compute annual interest: $30,000 × 6$1,800, payable annually.
• Recognize $1,800 as accrued interest liability because no payment made by reporting date and interest due within the next 12 months.
• Record $1,800 in current liabilities and$30,000 in non-current liabilities per accrual accounting principles.

Why B is correct:

• Matches IAS 1 requirements by separating short-term accrued interest (due within 12 months) as current from long-term principal as non-current.

Why the others are wrong:

• A: Ignores accrued interest, understating current liabilities.
• C: Duplicates B but listed separately; B is the designated correct choice.
• D: Misclassifies entire principal as current, ignoring 10-year term.

Final answer: B