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Hi
I’ve got a question on lease liability calculation in Fino case – the question asks about non current liability as at 31.3.2009. In the narrative it is said that the present value of future lease payments is 350 000 and the lease agreement states that there will be 3 annual payments in advance starting on 1.4.2008 with deposit of 100 000 payable on 1.4.2007. So we have effectively 4 payment to be paid in advance isn’t it? I would calculate it as follows : 350 000 (b/f) + 350 000×10% ( interest)- 100 000(pmt) = 285 000 (c/f) as at 31.3.2008. 285 000 (b/f) + 285 000 x 10% – 100 000 (pmt) = 213 500 (c/f) as at 31.3.2009. So the non current liability would be: 213 500 – 100 000 (current liability) = 113 500.The answer in P&RK is 247 380 – what did I wrong in my calculations or assumptions?
Please advice. Thank you.
Hi,
It is tricky as you have to have answered Q157 correctly first. The right of use asset is $478,000 using the answer from this question and so that is the starting point of your calculation.
We would then immediately deduct the $100,000 deposit payment to reduce the liability, and then we would continue in the same way in which you have done above by applying the interest rate and deducting the annual lease payments. Have a try and see if you then come up with the correct answer.
Thanks
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