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Hi sir
I am finding it difficult to understand this particular sum . plz help me
on 1oct 2013, Fresco acquired an item under a 5 year lease agreement .The lease required an Immediate deposit of 2million. the present value of future payments was 25 million . The agreement had an implicit finance cost of 10% pa and annual costs of 6 million paid on 30 sept each of 5 years . what will be the non current liability in fresco statement of financial position as at 30 sept 2015 ?
Ans D 385,00,00
Plz can you explain me how they arrived at this figure ?Hi,
You need to prepare a lease payable table, with payments in arrears. So you need to start with the opening lease balance, charge interest at 10% on this and then deduct the annual payment to get to the closing balance.
You will need to do this for the year’s ended Sept’14, Sept’15 and Sept’16. When you look to the right of the payment made in year-ended Sept’16 that should be the non-current liability.
Try it and see how you get on.
Thanks
Present value of future cash flows -25000
Initial payment at commencement of lease -2000
Right is use asset value -27000
cash payment at commencement of lease (2000)
lease liablity -25000
Int at 10 %-2500
payment in arrears-30/09/2014-(6000)
liablity b/f 1/10/2014-21,500
int at 10%–2150
payment in arrears 30/09/2015-(6000)
lease liablity c/f 1/10/2015- 17,650
Int at 10%-1765
payment in arrears 30/09/2016-(6000)
lease liablity c/f -1/10/2016-13,415therefore non current liability for 30/09/2015 is it 13,415 ?
Hi,
It looks like you’ve done the lease table correctly but aren’t getting the answer for some reason. Where can I find the actual question please so that I can look at it in a bit more detail?
Thanks
Hi,
I think that the question should be asking for the value of the current liability at 31 September X4 and not X5. If we assume this then the liability is 21,500 and the non-current liability is the 17,650, being the number immediately to the right of the final payment in the next year. The current liability is then the difference between the 21,500 and 17,650.
Glad we got there eventually!
Thanks
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