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Help sir..
Under a three year lease agreement a company pays a non returnable deposit of $100000 and will also pay three rental payments of $100000 per annum commencing at the start of the lease.The asset has an estimated economic life of six years.
Required : Calculate the charge to the income statement in each year and any balances in the statement of financial position at the end of each year.
I can’t understand why there should b an entry in the SFP under operating lease..Because the non-returnable payment of $100,000 needs to be spread over the life of the operating lease agreement
So, at the end of the first year, in SoPorL there will be $100,000 rental + $33,333 allocated part of the non-returnable deposit
But we paid $100,000 rental and $100,000 non returnable deposit
So at the end of the first year there will be a prepayment (deferred expense) of $66,667
Is that better?
now I understand.. jst tell me how should I account for this prepayment in the SFP?
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