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On 1 April 20X3, Warminster entered into a lease agreement. The payment terms comprise $60,000 payable on 1 April 20X3 followed by three further payments of $60,000 payable on 31 March 20X4, 20X5 and 20X6. The present value of the initial lease liability was $140,000 and the interest rate implicit in the lease is 14%.
What amount of interest should be expensed to profit or loss for the year ended 31 March 20X5?
A. $26,712
B. $19,600
C. $13,944
D. $7,496My doubt here is how should we consider the lease payments as arrears or advance since 1st lease rental paid is on 1st April we need to take it as advance and remaining lease rental payments as arrears?
It’s confusing can you help me in find out that part aloneHi,
The lease rentals are in advance as they are at the start of the lease period, being 1 April.
Thanks
Shadeen ltd entered into an agreement to lease an item of plant on 1 october 2008. the lease required four annual payments of $200,000 each, commencing on 1 october 2008. the plant has useful life of 4 years and is to be screapped at the end of the period. the present value of the lease payment is $700,000. the implicit interest rate within the lease is 10%. prepare extract financial statement in respect of the leased asset for the year ended 31.03. 2009
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