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Chapter 20
CHAPTER 6 – LEASES
Example 6.1
(i) Arrears (ii) Advance
$000 $000
Statement of profit or loss (extract)
Depreciation (4,000/5) 800 800
Finance cost (see workings) 317 378
Statement of financial position (extract)
Non-current asset (4,000 – 800) 3,200 3,200
Non-current liabilities (see workings) 2,580 2,378
Current liabilities (see workings) 737 1,000
Workings
(i) Arrears:
Year Opening Interest Payment Closing
7.93%
$000 $000 $000 $000
1 4,000 317 (1,000) 3,317
2 3,317 263 (1,000) 2,580
Current liability = 3,317 – 2,580 = 737
Non-current liability = Amount owing at end of year 2 = 2,580
(ii) Advance:
Year Opening Payment Sub-total Interest @12.59% Closing
$000 $000 $000 $000 $000
1 4,000 (1,000) 3,000 378 3,378
2 3,378 (1,000) 2,378
Current liability= 3,378 – 2,378 = 1,000
Non-current liability= 2,378
Depreciation is charged over the lower of the useful economic lifetime or
the lease term. In this case they are both 5 years.
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