Hi,
If the lease payments are due
at the beginning of each year, then annuity due factor to be used. If payable
at end of each year, ordinary annuity to be used.
Example:
Company signs contract on 1st Jan and 1st payment is to be done immediately on signing and subsequent payments after 12 months - Annuity due factor
Signs contract on 1st Jan but first payment on 31st Dec of the year - Ordinary Annuity.
Trust that helps!
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Abdul Naser Parkar
Analyst
Al Nasr, Al Sadd Doha
Qatar
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Original Message:
Sent: 02-05-2021 09:24 PM
From: Alyssa Marielle Enriquez
Subject: Present value of Leases
Hi,
Quick question: In calculating the present value of the lease liability, do I use the PV for an annuity or the PV for ordinary annuity for the PV of rental payment? In the study unit in Gleim, it showed using the ordinary annuity. But when the PV for an annuity was present along with ordinary annuity, the PV for an annuity is used...
Example of it is:
For an annuity due with 5 payments | 4.240 |
For an ordinary annuity with 5 payments | 3.890 |
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Alyssa Enriquez
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