Leases

Hi Saiyini, If I'm right I could try help you out, current liability is $7117? (maybe some rounding differences) If I'm wrong I'll have to recheck my workings.

yes that is right how did you work that out?

First calculate the NPV of the lease liability either through calculator or tables, or which ever method you prefer $30373 • During the first year: Initial lease liability: 30 373 Interest: 3 645 [30373 * 12%] payment: 10 000 closing balance: 24018 [30373 + 3645 - 10000] • Second year: Opening balance: 24018 Interest: 2882 Payment: 10 000 Closing balance: 16900 Recall: the current liability that will be registered in the financials for the first year is the principal amount that will be paid in the next financial year (the next 12 months), and the non-current liability will be what needs to be paid in the years there after. •Current liability is 24018 - 16900 = 7118 • OR simply the payment less interest charged during the second year: 10000 - 2882 = 7118 And similarly the non-current is: 16 900 because this is what's going to be paid after year 2

Thank you I struggled with working out the NPV- do you know a quick method than using the equation ?

I pretty much exclusively use my financial calculator to calculate everything, but I would assume that the next best option is to use the discount factor from the tables. Year 1: 10 000 * 0.893 = 8 930 Year 2: 10 000 * 0.797 = 7 970 Year 3: 10 000 * 0.712 = 7 120 Year 4: 10 000 * 0.636 = 6 360 = 30380 I wrote yesterday, can confirm the PV tables are there but no formulas.