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Hi Mike, please guide for the following question. Thank you.
During the y.e 31 Mar x5, Delight entered into two lease transactions:
– on 1 Apr x4, a payment $80,000 being the first of five equal annual payments of a finance lease for an item of plant. The lease has an implicit interest rate of 10% and the fair value (cost to purchase) of the leased equipment on 1 Apr x4 was $333,600.
– on 1 Nov x4, payment of $12,000 for a one yr lease of an item of packaging equipment.
What amount in total would be charged to SOPL for ye 31 Mar x5?
No, the answer’s correct. I was wondering whether you were going to agree and then I would have pointed out that that first $80,000 includes no interest – it is an entirely capital payment
Thus the amount outstanding for 1 year with effect from 1 April, 2014 is $253,600 and 10% of that is $25,360
Depreciation is $333,600 / 5 = $66,720
and the operating lease is a further $12,000 x 5/12 = $5,000
A total lease cost of $97,080
OK?
I see. So there is no need to consider any impairment loss but to take $333,600 as the total finance lease. Is it correct to put it like that?
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