In this question, Liability is recognized net of interest i.e.$ 22,730 at the inception. Thereafter interest of $ 887 is added and deducted the annual installment of $ 5,000 giving again net of interest closing liability of $ 18,617. When separating closing balance into current and non-current why do we recognize current liability portion as $ 5,000 which includes the interest with out identifying as $ 4,319 ($ 5,000- next year interest of $ 681) and then take the balancing figure of $ 14,298 as non-current liability. In this case we recognize lease liability at net of interest as did under IAS 17?
Thank you for the video. What would happen to the lease liabilities table if leasee cannot follow the payment schedule. Let say if the lease payment is monthly, and leasee missed the last 3 months payment. How does it impact to interest and lease liabilities? And what are the accounting enties?
Why is the difference between the Right-of-use and Liability on the Balance Sheet irregular, or do not follow a pattern as the year progresses? Year 1 Asset less Liability = (33), Year 2 = (360), Year 3 = (471), Year 4 = (354)
Please post your questions to our tutor on Ask the tutor forums, tutors do NOT monitor TH-cam opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-financial-reporting-fr-exams/
This video is wrong. Even the illustration just after in the notes contradicts this video. The initial liability is 17730, not 22730. The initial $5000 is not included in the liability since it is already paid… This is how it is actually recognised. Initial lease liability is $17,730. And initial use of asset = lease liability+ initial payment + direct cost - reimbursement So initial use of asset = 17,730+ 5000+ 1000 - 500 = 23,230.
@@giftkafula5013 I’m sorry, I wish I could help you but I wouldn’t know where to find that. This lecture series from open tuition is pretty good to be honest (all 122 or so videos I mean). That’s what I’m using for the exam. You just have to watch out for one or two mistakes.
Hey, you may be missing something. The $5000 wasn't paid it was just stated as the amortized payment to be made every year. The question then stated that the minimum pv of the lease payment is 22730. The video is correct. You only assumed the $5000 was paid cash, which wasn't what the question stated. Kindly review.
joja zenande you will use the present value of ordinary Annuity on future lease payments to get the present value of lease liability. And the same procedure remain the same.
Great Tutor. Thank you
Why didn’t you add the 5000 annual lease payment made at the beg or at the commencement date to the right of use Asset
In this question, Liability is recognized net of interest i.e.$ 22,730 at the inception. Thereafter interest of $ 887 is added and deducted the annual installment of $ 5,000 giving again net of interest closing liability of $ 18,617. When separating closing balance into current and non-current why do we recognize current liability portion as $ 5,000 which includes the interest with out identifying as $ 4,319 ($ 5,000- next year interest of $ 681) and then take the balancing figure of $ 14,298 as non-current liability. In this case we recognize lease liability at net of interest as did under IAS 17?
What are the journal entries that we will pass?
Great lecture 👏🏾👏🏾👏🏾👏🏾👏🏾👏🏾👏🏾
Thanks for the video. May I ask, the separation to current and non-current liabilities (at the end) is for year two, right?
I think it should be for year 1.
Thank you for the video. What would happen to the lease liabilities table if leasee cannot follow the payment schedule. Let say if the lease payment is monthly, and leasee missed the last 3 months payment. How does it impact to interest and lease liabilities? And what are the accounting enties?
Why is the difference between the Right-of-use and Liability on the Balance Sheet irregular, or do not follow a pattern as the year progresses? Year 1 Asset less Liability = (33), Year 2 = (360), Year 3 = (471), Year 4 = (354)
Please post your questions to our tutor on Ask the tutor forums, tutors do NOT monitor TH-cam opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-financial-reporting-fr-exams/
This video is wrong. Even the illustration just after in the notes contradicts this video.
The initial liability is 17730, not 22730. The initial $5000 is not included in the liability since it is already paid…
This is how it is actually recognised. Initial lease liability is $17,730.
And initial use of asset = lease liability+ initial payment + direct cost - reimbursement
So initial use of asset = 17,730+ 5000+ 1000 - 500 = 23,230.
Hi I agree. Can you please link me to a video that does it the correct way? Or any notes?
@@giftkafula5013 I’m sorry, I wish I could help you but I wouldn’t know where to find that. This lecture series from open tuition is pretty good to be honest (all 122 or so videos I mean). That’s what I’m using for the exam. You just have to watch out for one or two mistakes.
Hey, you may be missing something. The $5000 wasn't paid it was just stated as the amortized payment to be made every year. The question then stated that the minimum pv of the lease payment is 22730. The video is correct. You only assumed the $5000 was paid cash, which wasn't what the question stated. Kindly review.
PM was not as hard as this 😭.
Who is pear?
Exactly.
The lessor
When there is both fair value and lessor's cost which of the two will we use to calculate the amortization?
when you increase the RUA by 500 on the direct cost and incentive, what is the credit entry to that?
Credited to Cash/Bank.
what happens to the interest if payments are made at the end of the financial year
joja zenande you will use the present value of ordinary Annuity on future lease payments to get the present value of lease liability. And the same procedure remain the same.
what happened if the cash is paid in the end of the financial year sir?
The worksheet will need to reflect the payments to be end of every year.