ACCA Applied Knowledge · Financial Accounting · Statement of cash flows (excluding partnerships)
Cedar Co has a finance lease for equipment. The lease liability was $90,000 at 1 January (current $25,000 and non-current $65,000) and $62,000 at 31 December in total. No new leases were entered into during the year, and finance charges accrued and paid are ignored. What is the cash outflow for lease capital repayments in financing activities?
The outflow is $28,000, the fall in the total lease liability from $90,000 to $62,000. With no new leases, this decrease equals the capital repaid in cash. Using either balance alone or adding them together would not measure the cash movement.
- A$28,000Correct
- B$62,000
- C$90,000
- D$152,000
Explanation
With no new leases, the reduction in total liability is the capital repaid: $90,000 - $62,000 = $28,000. Using the closing balance or the sum of balances is wrong because it ignores that only the movement represents cash paid.
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