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F7 Chapter 16 Questions

VIVA

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    • I believe that it’s 249,167 …

      Cost 575,000 less deposit 195,000 leaves an amount ‘borrowed’ of 380,000

      Interest for 7 months to 31 January, 2015 is 38,000 * 7/12 = 22,167

      So total liability at 31 January 2015 is 402,167

      Payable within 12 months is 153,000 so payable more than 12 months hence is 402,167 – 153,000 = 249,167

      OK?

    • At 31 March 2016 we don’t owe the interest to March 2017

      That only becomes an obligation as we move through the period 1 April, 2016 to 31 March, 2017

      When calculating the deferred liability, we are only liable for the capital element … the interest charge doesn’t feature in that deferred liability because it has not yet become an obligation whereas the entire capital amount IS an obligation with effect from the date the lease was signed

      OK?

  7. Hi! For question 2,I don’t understand why the interest is not taken into account when calculating the current liabilities? I remember from the lecture there was an example where you extracted the lease obligation balance from the prior year, i.e. instalment less interest accrual. Why isn’t it the case in the question? Thanks

    • Isn’t it because the question asks for the current liabilities in respect of this lease

      Included within the current liabilities in respect of the lease there is the current obligation capital element AND the current obligation lease interest element

      OK?

      • That’s what I thought. Therefore, my interpretation is that the current liability should be 153-38=115.

        Please advice on where I got it wrong. Thanks.

      • No, the answer is correct … the question actually tells you that there is an annual payment of $153,000 so that’s the amount that will be included within current liabilities

        That last line of mine in my previous post tells you that “there is the current obligation capital element AND the current obligation lease interest element” and BOTH of these obligations should be included within current liabilities

        OK?

      • I still don’t 100% get this one. Could you explain “and includes the interest accrued of 38,000” in the answer? How is that 38,000 included? Thanks.

  10. In Q1 we depreciate the asset in 4 years, but the useful life is 5 years. Should we always take the ease period for depretiation in case it is shorter than assets useful life? It really seems strange for me as I base the leasing period on the possibility to pay (like my cash flow), but this can be asset which I will use for much more than the lease period. May be I have missed something…

    • Cynthia, I cannot see how that second paragraph could be misinterpreted!

      This is a six year lease that finishes in March 2020

      So at March 2019 there is one more year to go

      At March 2018 there are two more years to go

      At March 2017 there are three more years to go

      At March 2016 there are four more years to go

      At March 2015 there are five more years to go

      and at March 2014 there are six years to go

      So Sparti pays a deposit on 1 April, 2014 of $4,850,000 and then, the question says, “with further annual payment of $4 million on each successive 1 April for 5 years commencing 1 April, 2015”

      Now what is there there that is at all ambiguous?

      OK?

    • If that’s the figure for 31 March 2017 and we’re looking at the financial statements for 31 March 2016, then that $9,932 is not payable within the next 12 months and therefore it’s non-current as at 31 March 2016

      OK?

      • I think that, if you had read my post to an earlier question, you would see that I too am struggling to arrive at 107. In fact, I’m getting 70 as the answer

        I am in the process of going through these practice questions ironing out the printing errors and my own calculation errors.

        But thanks for pointing out these mistakes 馃檪

  16. In a column of figures you should have:

    575 fair value
    (195) deposit
    380 @ 30.6.2014
    22 interest to 31.01.2015
    402 outstanding at 31.01.2015
    16 interest to 30.06.2015
    418 outstanding at 30.06.2015
    153 payment on 30.06.2015
    265 outstanding at 30.06.2015
    15.46 interest to 31.01.2016
    280.46 outstanding at 31.01.2016

    This compares with 402 outstanding from one year earlier and the difference is the current liability

    Ok?

    • Hi Mr Mike,

      I understand the calculations done here, however my problem is that we consider Current liability is the capital part that will be paid in the following 12 months. As at 31.01.2015 the only payment to be done in the following 12 months is on the 30 June, which comprises interest from 30.01.2014 until 30.01.2015 380,000 x 10% = 38,000.
      Therefore wouldn麓t the correct answer be 153 – 38 = 115, since this is the share of capital that will be paid in the following 12 months?

      Thank you in advance

      • But as at end January, the amount of interest accrued within the amount outstanding is only seven months worth

        Which number question is it and I’ll look at it again but this time post your question on the Ask the Tutor forum – that way will guarantee that I see it!

      • OK, by the way, to anynoe who reads it, I wrote the dates wrong, interest paid on the 30.06.2015 is for the period from 30.06.2014 to 30.06.2015.
        I麓ll post it on the Ask the Tutor forum.

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