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Z entered into a five year lease agreement on 1 November 20X2 paying 10,975$ per annum, commencing 31 October 20X3. The present value of the lease payments was 45,000$ and the interest rate implicit in the lease was 7%
What is the amount to be shown within non-current liabilities at 31 October 20X3?
A 26,200
B 28,802
C 37,175
D 36,407Answer is B
My question – why the answer is B and not C, isn’t B the amount that will appear at 31 October 20X4 and not 20X3?
The questions is asking for the non-current liability at 31 Oct 20X3. To calculate this we look at the next row in the lease payable table, so the on for the year ended 31 Oct 20X4, and then the number immediately to the right of the final payment is the non-current liability figure we are asked for. The answe is therefore correct.
If you want more details behind the treatment then you will find it in the videos.
Thanks
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