Lease Q103 Kit BPP — OpenTuition Forums

DDinh5y ago

Hi, please help me to explain about question of lease. 1/1/20x6, A company hire a machine under 4 year lease.a deposit 700.000 was payble on 1/1/20x6.PV of future lease pmt was 1.871.100. a further 3 instalment of 700.000 are payable annually in advance.the interest rate implicit is 6%.Why the interest for year ended 31Dec 20x6 is 6% x 1.871.100, not 6% x(1.871.100 -700.000) as example 2 of your lecturer? Thanks

P2-D2Tutor5y ago#1

Hi, This one catches everyone out and it is because the 1,871,000 is the PV of FUTURE lease payments. The deposit is not a future lease payment and has therefore already been deducted. Thanks

DDinh5y ago#2

Thank you sir, i wonder if the sentence is that the PV of the minimum lease pmt is 1.871.000, we will deduct 700.000 to calculate interest?

P2-D2Tutor5y ago#3

Yes, that's correct. Thanks