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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › fellini co
On 1 January 20X6 Fellini Co hired a machine under a four year lease. A deposit of $700,000 was payable on
the commencement of the lease on 1 January 20X6. The present value of the future lease payments was
$1,871,100. A further 3 instalments of $700,000 are payable annually in advance. The interest rate implicit in
the lease is 6%.
What amount will appear under non-current liabilities in respect of this lease in the statement of financial
position of Fellini Co at 31 December 20X6? [Answers to nearest $’000]
In this question, the payment is made in advance, and therefore the payment is deducted and then the interest is accrued. However this is not the case in the answer at the back. Is the book answer wrong?
Yes, it appears to be a mistake if the payments are made in advance as stated in the question.