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.

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

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.