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Mr Little, sir, please have a look on the following example.
The substance of the lease is that it is s financial lease, 60000 fair value, four years, 0 residual value. Interest rate is 10%.
This lease is incorrectly treated as an operating lease, 19000 annual payments.
What is the effect on profit and loss of this incorrect treatment? I calculated it to be 2000 overstatement. Am I right?
Thsnks.
On what date are installments paid?
What date was the lease signed?
What’s the year end?
Incomplete information – again! :-((
IF it was signed on the first day of the accounting year, and IF installments are paid on the last day of the accounting year, and IF this is the first year that we are considering then my calculation saye 15,000 depreciation and 6,000 finance lease interest gives a total of 21,000 compared with 19,000 operating lease cost
So, Yes, 2,000 difference overstated profits
Dear Mike,
The payments were made in arrears. Was signed on January 1 2010 and the question asked for 31 December 2010. So, overstatement of 2000?
Thank you, i got overstatement of 2000 as well!
Dear Sir, my last question to you till next sitting (probably). Just tell me yes or no, please.
Grant is received in April 1, 2015. Year end is 31th of September. Grant amount is 5,000,000. Time period: 10 years; calculation should be based on months. What is the balance in 31th of September 2018?
I got 3.25 million. Does this sound reasonable? 6 months for 2015; 12 months for 2016; 12 months for 2017; 12 months for 2018. Hope my calculated answer is correct.
Thank you.
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