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- April 26, 2017 at 6:35 pm #384042
Hi Mr Mike, I have two important questions here.
Question has been taken from 3 June exam 2015
Trial balance relates to Clarion as at 31 March 2015
8%loan note -20000(credit side)
Operating lease payments-2000(debit side)
Suspense account-5800(debit side)Income tax rate 25%
Notes.
On 31 March 2015, one quarter of the 8% loan notes were redeemed at par and six month’s outstanding loan interest was paid.The suspense account represents the double entry corresponding the the cash pay for the capital redemption and the outstanding interest.Clarion renewed an operating lease on a property on 1 April 2014.The operating lease payments represent an annual pay(in advance) of $1 million and a lease premium of $1 million. The leases is for four years and operating lease expenses should be included in cost of sales.
Could you explain it to me?
Elimination of suspense account
Cash cost of loan note redemption (20000*25%)-5000
6 month’s interest on loan note (20000*8%*6/12)—800
overall 5800Here is my question relating to lease premium?does new standard support to capitalize lease premium?I made research to get any info about lease premium but can not find anything related to it
Could you explain it please?
It is done like that
1000+(1000/4)———–1250Under non-current asset
unamortised lease premium(1000-250-250(this is showen under current asset as prepayment)Under current asset
Prepayment-250April 26, 2017 at 7:44 pm #384051Surely the 6 months’ outstanding loan interest relates only to the $5,000 loan that was redeemed so that $800 needs to be recalculated as
6 month’s interest on loan note (20000/4*8%*6/12) = 200
“does new standard support to capitalize lease premium?”
IFRS 16 is not in the F7 syllabus until September
(There is a new chapter on the IFRS in the up-to-date course notes)
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