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  • 1.  Present value of Leases

    Posted 02-05-2021 09:25 PM
    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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  • 2.  RE: Present value of Leases

    Posted 02-07-2021 04:19 AM
    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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  • 3.  RE: Present value of Leases

    Posted 02-10-2021 12:40 PM
    Thank you so much!!


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    Alyssa Marielle Enriquez
    Other
    Castro Valley CA
    United States
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