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LEASING – PROBLEM IN DETERMINING STARTING DATE

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › LEASING – PROBLEM IN DETERMINING STARTING DATE

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by MikeLittle.
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  • Author
    Posts
  • August 20, 2016 at 6:58 pm #334267
    harry1094
    Participant
    • Topics: 29
    • Replies: 46
    • ☆☆

    Dear ACCA tutor,

    I have a question like topic title.

    “Tourmalet sold an item of plant for $50 million on 1 April 20X4. The plant had a carrying amount of $40 million at the date of sale, which was charged to cost of sales. On the same date, Tourmalet entered into an agreement to lease back the plant for the next five years (being the estimated remaining life of the plant) at a cost of $14 million per annum payable annually in arrears. An arrangement of this type is normally deemed to have a financing cost of 10% per annum.
    What amount will be shown as “Finance lease interest” in the statement of profit or loss for the year ended 30 September 20X4?”

    I know that is “sale and lease back”, and the lease arrangement results in a finance lease. However, because the period of lease term is different from the fiscal year, I dont know how to resolve this tough question?

    Please help me, or show me the guidance. Thank you so much!

    August 20, 2016 at 7:49 pm #334272
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Calculate the figures for a full year and then time apportion them

    It’s not strictly accurate but it’s what you are expected to do for the exam

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