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Hi
Please can you help me with this;
During 28.02.15 Ahmed entered into 2 lease contracts;
1) 01.03.14 a payment of £120,000 was made as the first of four equal annual instalments on a finance lease for an item of plant. The lease had an implicit interest rate of 10% and the fait value of the plant on 01.03.14 was £390,000
2) On 01.02.15 a payment of £30,000 was made for a one year lease on an item of excavation equipment.
What amount should be charged to the profit and loss for the year ended 28.02.15 in respect of the above transactions?
The answer according to ACCA is £154,500 but I cannot work out how this answer was arrived at?
Thank you
Caroline
Charge to profit and loss as a result of finance lease is due to implicit finance cost of lease and as a result of depreciation.
390000-120000=270000
270000×0.1=27000
Depreciation 390/4=97500Also charge due to operating lease is 30000.
27000+97500+30000=154500If you have any questions about how I calculated the above answer don’t hesitate to ask.
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