HI SIR, I HAVE SOME QUESTIONS WITH REGARDS TO THE ACCOUNTING RECORDING OF FINANCE LEASE AS WELL AS OPERATING LEASE. my questions are ;-
In sofp, under current liabilities why there is an entry recorded as capital. ( for rental made in arrears)....
In sofp again, under current liabilities why there is an entry of accrued interest and capitaL....
As for operating lease, in sofp therE is an entry of prepayments under current asset....
Please explain to me in detail about this and is it fixed for payment made in arrears,advance and for operating leases??
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Finance and Operating Lease
11y ago#1Jinder, is there not a video recording of the chapter on leases? And, if there is, surely I explain all this in the video!
If there isn't a video, post again and I'll explain it to you
I may have overlook the video,sorry sie...will check that out
thank you sir
11y ago#3Let me know, one way or the other and, if there isn't a video or, if there is and you still have doubts, post again
Sir, here is a question that i have just attempted ...this question is taken from the technical article from ACCA website.
Question
On April 1,2009 Shrub Co entered into an agreement to lease a machine that had an esyimated life of four years.Lease period is also 4 years at which point the asset will be returned to the leasing company.Shrub is required to pay for all maintenance and insurance cost relating yo the asset.Annual rent of $8000 payable in advance from 1 april 2009. Mavhine expected to have nil residual value at end of its life.machine have fair value $ 28000 at the inception of the lease.lessor invludes finance cost of 10% per annum when calculating annual rentals.
HOW SHOULD THE LEASE BE ACCOUNTED FOR IN FINANVIAL STATEMENT OF SHRUB FOR THE YEAR END 31 MARCH 2010 ?
may i know why for year 2011 there is no calculation for interest ?? i know year 2010 have to calculate interest...which amounts to $ 2000...
11y ago#5Because the question asks for how the item will be accounted for in the year to 2010.
The next installment of 8,000, payable "tomorrow", will include the 2,000 interest accrued for the year ended 31 March, 2010. There is no need to calculate the interest that would accrue over the year to 31 March, 2011
Is that ok?
If the question says how will it be accounted for in the year to 2011, i will have to include $2000 interest accrued for year ended 31 march 2011 right sir ?
In the lease table,the reason why we have to compute for the next year is to find out how much we have to allocate to Non current liability and current liability...did i get that teory right sir ?
11y ago#7Yes, to your first question.
And, yes too, for your second question
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