Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Operating Lease (Year to Year)
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- November 26, 2014 at 5:50 am #213281
Hi there,
Can anyone show me how to work out what the P&L and B.Sheet Extracts are in year 1,2,3 and 4 for the below example?
A company is leasing an asset under an operating lease. The initial deposit is £1,000 on 1 Jan of year 1, followed by 4 annual payments in arrears of £1,000 each on 31 December of years 1,2,3,4.
This will help cement the concept for me.
Thanks in advance
November 26, 2014 at 5:58 am #213283P.S If any of this would change if one payment say was made late, please let me know.
Thanks again
November 26, 2014 at 6:12 am #213285simple u pay 5000 to lesser
1000 initial and 4 annual payments this all time apportion and preyments are recorded in current assetsNovember 26, 2014 at 9:14 am #213325Hi Shaikh, I agree you’d pay the £5K and in the P&L extracts for each year, this would be released on a straight line basis over the 4 year lease term.
However, the key thing confusing me is the Preps, as the answer from the book for this example in year 1 is £750, (£1,000 Deposit/4 year lease term x 3 years remaining). This is despite the remaining lease balance being £3,000. Even if I assume the operating lease is bought into at the end of each year – I would still expect to see an additional £1,000 as a Prepaid current asset on each year’s balance sheet. This is why I can’t yet understand their answer.
Thanks in advance
November 26, 2014 at 9:53 am #213341You know what I thought about this and can see where I was going wrong. Thanks again.
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