Finance lease

OK, this is the full question:

Monty is a publicly listed company. Its financial statements for the year ended 31 March 2013 including comparatives
are shown below:
Statements of profit or loss and other comprehensive income for the year ended:
31 March 2013 31 March 2012
$’000 $’000
Revenue 31,000 25,000
Cost of sales (21,800) (18,600)
––––––– –––––––
Gross profit 9,200 6,400
Distribution costs (3,600) (2,400)
Administrative expenses (2,200) (1,600)
Finance costs – loan interest (150) (250)
– lease interest (250) (100)
––––––– –––––––
Profit before tax 3,000 2,050
Income tax expense (1,000) (750)
––––––– –––––––
Profit for the year 2,000 1,300
Other comprehensive income (note (i)) 1,350 nil
––––––– –––––––
3,350 1,300
––––––– –––––––
Statements of financial position as at:
31 March 2013 31 March 2012
$’000 $’000 $’000 $’000
Assets
Non-current assets
Property, plant and equipment 14,000 10,700
Deferred development expenditure 1,000 nil
––––––– –––––––
15,000 10,700
Current assets
Inventory 3,300 3,800
Trade receivables 2,950 2,200
Bank 50 6,300 1,300 7,300
–––––– ––––––– –––––– –––––––
Total assets 21,300 18,000
––––––– –––––––
Equity and liabilities
Equity
Equity shares of $1 each 8,000 8,000
Revaluation reserve 1,350 nil
Retained earnings 3,200 1,750
––––––– –––––––
12,550 9,750
Non-current liabilities
8% loan notes 1,400 3,125
Deferred tax 1,500 800
Finance lease obligation 1,200 4,100 900 4,825
–––––– ––––––
Current liabilities
Finance lease obligation 750 600
Trade payables 2,650 2,100
Current tax payable 1,250 4,650 725 3,425
–––––– ––––––– –––––– –––––––
Total equity and liabilities 21,300 18,000
–––––––
(i) On 1 July 2012, Monty acquired additional plant under a finance lease that had a fair value of $1·5 million. On this date it also revalued its property upwards by $2 million and transferred $650,000 of the resulting revaluation reserve this created to deferred tax. There were no disposals of non-current assets during the period.
(ii) Depreciation of property, plant and equipment was $900,000 and amortisation of the deferred development expenditure was $200,000 for the year ended 31 March 2013.

Prepare a statement of cash flows for Monty for the year ended 31 March 2013, in accordance with IAS 7 Statement of Cash Flows, using the indirect method.

the answer is:
Finance leases
Balances b/f – current (600)
– non-current (900)
New finance lease (1,500)
Balances c/f – current 750
– non-current 1,200
––––––
Balance cash repayment (1,050)
––––––
the question is: why the New finance lease of (1,500) treated differently as cash outflow, whereas, the increased finance lease of (1200-900) and (750-600) treated as cash inflow?

But, you still, Mike, differentiate between two issues have the same nature.

the amount of (1,500) “it is credited to the obligations account so it increases the liability to

the finance lessor”

if it was that, we will apply the same rule on the “money due to the finance lessor” which

will also increase the liability to the finance lessor .

as we know that the increased liability is a liability.
.

OK, that is good.

Thank you