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an operating lease on a property has 8 years left. the annual rental is 2.3m.
at the start of the year, the company got permission to make alterations to the property for 7m and agreed to pay for the restoration costs at the end of 8 years. the present value @8% is 5m.
my SOPL extract was correct so am not producing it here
in the extract for SOFP
NCA = 12000 – 1500 = 10500 ——this was correct
NCL = 5000 + 5000×8% = 5400 ——this was correct also
but i also added a figure of 5400×8% =432 as current liability as well.
please take me back to f3 just explain why am i not getting this
Because that interest has not yet accrued – it relates to next year, not this year. If you’re going to accrue future interest, why not accrue it for the full 7 years? In that case, there’s no point in working with present values!