Example: A company leased an asset to another company on 1 January 20X1 on the following terms. Lease term Inception of lease Annual instalments in advance Residual value of asset as guaranteed by lessee Expected residual value at end of lease Fair value of the asset Initial direct costs incurred by the lessor Interest rate implicit in the lease 4 years 1.1.X1 Rs. 22,000 Rs. 10,000 Rs. 12,000 Rs. 82,966 Rs. 700 11% Requirements a) Calculate the unguaranteed residual value and the net investment in the lease as at 1 January 20X1 b) Prepare extracts from the financial statements of the lessor for the year ended 31.12.X1 (excluding notes)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Example:
A company leased an asset to another company on 1 January 20X1 on the following
terms.
Lease term
4 years
Inception of lease
1.1.X1
Annual instalments in advance
Rs. 22,000
Residual value of asset as guaranteed by lessee
Rs. 10,000
Expected residual value at end of lease
Rs. 12,000
Fair value of the asset
Rs. 82,966
Initial direct costs incurred by the lessor
Rs. 700
Interest rate implicit in the lease
11%
Requirements
a) Calculate the unguaranteed residual value and the net investment in the lease
as at 1 January 20X1
b) Prepare extracts from the financial statements of the lessor for the year ended
31.12.X1 (excluding notes)
Transcribed Image Text:Example: A company leased an asset to another company on 1 January 20X1 on the following terms. Lease term 4 years Inception of lease 1.1.X1 Annual instalments in advance Rs. 22,000 Residual value of asset as guaranteed by lessee Rs. 10,000 Expected residual value at end of lease Rs. 12,000 Fair value of the asset Rs. 82,966 Initial direct costs incurred by the lessor Rs. 700 Interest rate implicit in the lease 11% Requirements a) Calculate the unguaranteed residual value and the net investment in the lease as at 1 January 20X1 b) Prepare extracts from the financial statements of the lessor for the year ended 31.12.X1 (excluding notes)
Expert Solution
steps

Step by step

Solved in 4 steps with 5 images

Blurred answer
Knowledge Booster
Lease accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education