• Avatar of MikeLittle says

      but how much interest RELATES to the accounting period? The payment on 1 July paid off the interest that had accrued for the period from 1 January up to 30 June. Interest then accrues from the period from 1 July up to 31 December – but that interest is not paid until “tomorrow” when we pay the next instalment on 1 January next year.

      Does that clear it up?

  1. avatar says

    Thank you for the excellent lecture. However, I suggest that you help us to solve part two of the question for a simple reason. The logic used to determine the non current liability and the current liability seems to be different if the rentals are paid in advance. I have not been able to decode this logic. I came across it in Kaplan.

    Thank you in advance!

    • Avatar of Mahoysam says

      If you check the notes, you will find the correct year at the back . Maybe the lecture is recorded when the question had a different year or something, but the answers in the notes have the correct year anyways.

      • Avatar of MikeLittle says

        @bajprincess, You’re absolutely correct. We need to subdivide the obligation to the lessor into current and long term and the easiest way is to progress the calculations up to the end of the accounting year following the year we are asked to consider

  2. avatar says

    In example two (Giedris) the estimated used life of the asset was nine (9) years however seven (7) years was used to calculate the depreciation. It was noted that seven (7) years was not mentioned in the question at any point. Why was the depreciation worked at seven (7) years.

    • Avatar of MikeLittle says

      @jehanhasan, You could really do with a “picture” of the “obligations account” where you show the capital amount outstanding and show the dates when the capital amount is then changed by the interest calculated on that capital amount. Then show the payment of the installment and the date and that should then leave you with the capital amount outstanding for the next period until we again calculate the interest ….. and so on

  3. avatar says

    sir in example 1 the payment is in arears and in example two it is clearly written that the rental payment is on 1st january and 1 july but in your answer , you did write the payment of 1500 on 30 june and 31 december so my question is, if the payment date does n,t effect the calculation then why it is mentioned clearly in question ? kindly explain about it.
    kind regards

    • Avatar of MikeLittle says

      @jehanhasan, It DOES affect the calculation – the payment date determines the capital element outstanding at any point in time and it’s the capital element upon which the interest is calculated until the next installment date

  4. avatar says

    dears Sir, Am I correct to think this question video was mixed on editing. At around 3 mins 5 secs the working figures appear to be suddenly totally different from the figures about 15 seconds before..i’m confused. Please view the video from 2min 45 sec to 3min 15 secs

    • Avatar of MikeLittle says

      @fzinyemba, Hi, no, it’s fine. The screen shots you refer to are the situation / schedule after two payments ( the earlier screen ) and then 2 instalments after that. If you look upwards from the second screen, you’ll find 15,295 higher up.

      It’s just that the second screen doesn’t show the 15,295 from the first screen

      Is that clear? I know what I’m trying to say but it seems to have come out a bit jumbled!

  5. avatar says

    Dear Sir

    Why have you started with 2004? The notes state that Giedris aquired asset on 1 January 2009 this I believe is the same for example 1
    Should it start with 2009 the year when the asset was aquired?

    Many thanks

  6. avatar says

    Sir, I don’t understand the answer to Giedruola that you said we do it ourselves especially extract of the SoFP where its written in the answer as follows:

    TNCA 13714
    C.L 1712
    LTL 11583
    not yet
    accrued 665

    My question is why is it the same as Gieoris and that figure of 665, its confusing please if u can help.


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