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Lease Q103 Kit BPP

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Lease Q103 Kit BPP

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 8, 2021 at 2:17 am #609616
    phuongmore
    Participant
    • Topics: 132
    • Replies: 128
    • ☆☆☆

    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: 7171
    • ☆☆☆☆☆

    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
    Participant
    • Topics: 132
    • Replies: 128
    • ☆☆☆

    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: 7171
    • ☆☆☆☆☆

    Yes, that’s correct.

    Thanks

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