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Dear Sir,
I’m currently working on the BPP revision kit and found this question is a bit confusing.
Q107 (pg30): On 1 Oct 20X3, F acquired an item of plant under a five-year lease agreement. The lease required an immediate deposit of £2m. The present value of the future payments was £25m. The agreement had an implicit finance cost of 10% per annum and annual rentals of £6m paid on 30 Sep each year for five years.
What will be the Non-current liability in F’s SoFP as at 30 September 20X5?
A. £2.5m
B. £2.3m
C. £2.15m
D. £3.85mThe answer is D
And this is from the answer part of BPP
“To work out the non-current portion of the liability at 30.09.20X4, we must take the calculation forward another year. The non-current portion of the year end liability of £21,500 is £17,650.”
I’m not sure what the question want to ask, the deduction in Non-current liability or the total amount of NCL in SoFP? Or is this just a typo mistake and it’s supposed to be “current liability at 30.09.20X4” instead?
Many thanks,
Hi,
To calculate the non-current liability you need to draw up the lease payable table as we have done in the lectures. Once you have the correct lay out for the payments, so here they are in arrears then you can work out the figure.
To do so you work another year of the calculations and look to the number immediately to the right of the payment made next year, and this is the non-current liability.
Thanks
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