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Hi Mike,
Please can you explain how to go about this one.
During the year ended 30 September 2014 Hyper entered into two lease transactions: On 1 October 2013, a payment $90,000 being the first of five equal annual payments of a finance lease for an item of plant. The lease has an implicit interest rate of 10% and the fair value (cost to purchase) of the leased equipment on 1 October 2013 was $340,000. On 1 January 2014, a payment of $18,000 for a one-year lease of an item of excavation equipment.
What amount in total would be charged to Hyper’s statement of profit or loss for the year ended 30 September 2014 in respect of the above transactions?
A $108,000
B $111,000
C $106,500
D $115,500I worked the answer out to be 25000 interest plus 90000 plus 18000 .
Thanks.
look for my work below :-
lower of pvmlp or fv will be 340,000
we will add the interest at the beginning as its advance payment
so *10% will be 34,000; gives us 374,000 minus the annual payment (90,000) :- net of 284,000OUR ANSWER SPL:-
Interest = 34,000
operating lease which related to the year (acquired in jan) so 18000*9/12= 13,500
Depreciation= 340/5=68,000total of 115,500.
i hope to be the correct.
Thanks a7mdsuliman.
I missed depreciation!!! what a silly mistake.
the installment payments are made in advance so
340000-90000 =250000interest =25000
depreciation 340/5=68,000
second lease payment 18000 * 9/12 = 13500gives 106500.
Which one is correct Mike.
Just checked the answer. it is 106500.Oh i got confused, in advance payment should be deducted first then to add the interest.
your answer is correct.Busybee – I rarely look at the general forum!
If you want to address me for a question that I shall answer, post it on Ask ACCA Tutor forum!
Yes, 106,500 is correct
During the year ended 30 September 20X4 Hyper entered into two lease transactions:
On 1 October 20X3, a payment of $90,000 being the first of five equal annual payments of a lease for an item of plant. The lease has an implicit interest rate of 10% and the carrying amount of the ROU asset and the present value of the lease liability were both initially measured at $340,000.
On 1 January 20X4, a payment of $18,000 for an eight-month lease of an item of excavation equipment.
What total expense should be recognised in Hyper’s statement of profit or loss for the year ended 30 September 20X4 in respect of the above transactions?
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