Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Hyper co lease advanced payement bpp
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- January 22, 2021 at 1:39 pm #607546
Dear Tutor,
During the year ended 30 September 20X4 Hyper Co entered into the following transactions:
On 1 October 20X3 Hyper Co acquired under a lease to obtain a right of use asset which was initially
measured at $340,000.Under the terms of the lease, a payment in advance of $90,000 was made on
commencement of the lease, being the first of five equal annual payments.The right of use asset has a five-
year useful life. The lease has an implicit interest rate of 10%.On 1 August 20X4, Hyper Co made a payment of $18,000 for a nine-month lease of an item of excavation equipment.
Hyper wishes to utilise the exceptions available under IFRS 16 Leases.What amount in total would be charged to Hyper Co’s statement of profit or loss for the year ended
30 September 20X4 in respect of the above transactions?I need help with this specific part of the question:
The solution for the finance cost of the year.
Lease intrest (340.000-90000)*10%= 25000
I thought we calculated the finance cost first.
Pv finance cost.10% Payment.Balance
340.000. 34.000. 90.000. 284.000Thank you.
January 23, 2021 at 9:50 am #607634Hi,
The payment made is in advances, so this immediately reduces the value of the lease liability, hence no interest can accrue on this amount. This is why they have deducted the 90,000 from the value of the lease liability to calculate the interest for the year.
Thanks
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