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Lease Q103 Kit BPP

This topic has 3 replies, 2 voices, and was last updated 1 year ago by P2-D2.

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February 8, 2021 at 2:17 am #609616
phuongmore
- Topics: 65
- Replies: 75
Hi, please help me to explain about question of lease. 1/1/20×6, A company hire a machine under 4 year lease.a deposit 700.000 was payble on 1/1/20×6.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 20×6 is 6% x 1.871.100, not 6% x(1.871.100 -700.000) as example 2 of your lecturer? Thanks
February 8, 2021 at 8:57 pm #609735
P2-D2
Keymaster
- Topics: 4
- Replies: 6227
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
February 9, 2021 at 12:52 pm #609830
phuongmore
- Topics: 65
- Replies: 75
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?
February 13, 2021 at 10:41 am #610226
P2-D2
Keymaster
- Topics: 4
- Replies: 6227
Yes, that’s correct.

Thanks
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