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fellini co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › fellini co

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 24, 2024 at 6:55 am #700995
    sahalacca
    Participant
    • Topics: 17
    • Replies: 3
    • ☆

    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?

    February 26, 2024 at 8:47 pm #701214
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7205
    • ☆☆☆☆☆

    Yes, it appears to be a mistake if the payments are made in advance as stated in the question.

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