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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Payment in Advance Lease accounting
Hi Sir,
I am a bit confused on the given example in your lecture on lease accounting treatment (Example 4, lessee accounting, page 83, Plum).
The year 1 lease payment is paid in advance: $5000 on 1/1/2015. So the lease liability ($22730) is the present value of the future cash payments in 4 instalments: $5000 each on 1/1 from 2016 to 2019.
I don’t get it why the $5000 needs to be deducted from the lease liability to calculate the amortised finance cost for year 1. I assume that $5000 is the initial payment on 1/1/2015, right? Shouldn’t that not part of the liability rationaled in the above paragraph?
I concur in year 2, $5000 should be deducted from the liability brought forward from year 1.
The present value of the minimum lease payments is 22730
So the present value of the future lease payments will be 17 730
I think that will put you back on the right track
Oh, silly me, I mistook 5000*(1+3.546) as 5000*3.546. Thank you for pointing out.
My pleasure.