First off, S2000 you are a magician, thanks for your work/help. I was checking out this page: http://financialexamhelp123.com/leases-iii-effect-on-financial-statements-and-ratios/
I was wondering why your lease tables look different than the lease tables in the book. I was looking at example 13 and 14 in CFAI’s Reading 16 Long Lived Assets.
CFAI’s first year has 0 interest in their tables in example 13 and 14. Whereas your tables on leases always has interest in year 1. Why is that?
bump
Didn’t have time to do the full example, but my first guess is :
Interest is charged on the beginning balance (same thing for Pension plans, etc). If the payment of lease is beginning of year, then there would be no interest charge yet. If payment of lease is end of year, then there would an interest portion.
Hope sir s2000 have time to clarify this for you. Otherwise i think the above is in the right direction.
ahhh…yes that’s probably right. I’ve had so many wrong answers due to this beginning of the period stuff. Does anyone have any tips for when to look at things from the beginning of the period?
Yup, that’s it.
I should probably include another example with beginning-of-the-year payments.
Thanks for the head’s up.