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Why is it in some cases the immediate deposit is deducted and in other cases it is not? I don’t understand the logic here…Please help I have exam in 3 weeks
Hi,
It depends on what the narrative is in the specific question. If the figure given is the total present value of the lease payments then we’d need to deduct the deposit as it will be included in this figure.
If the figure is the present value of future lease payments then we don’t need to deduct the deposit as the deposit is not a future lease payment given it is made at the inception of the lease.
I think there is an illustration in the class notes that looks at this scenario.
Thanks
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