Qt: AD Softex Ltd. has taken the assets on lease from ACS Impex Ltd. Th following information is given below: Lease term = 4years fair value at inception of lease = Rs. 16,00,000 Lease Rent = Rs. 5,00,000 p.a. at the end of year Guaranteed Residual Value = Rs. 1,00,000 Expected Residual Value = Rs. 3,00,000 Implicit Interest Rate = 14.97% Dothe accounting in the book of lessee? Q 3. R Lid. (the lessee) acquired machinery on lease from S Ltd. (the Lessor) on January 1, 2000. The lease term covers the entire economic life of the machinery ie.3 years, The fair value of the machinery on January 1, 2000 is Rs. 3,50,000. The lease agreement requires the lessee to pay an amount of Rs. 1,50,000 per year beginning December 31, 2000. The lessee has guaranteed a residual value of Rs. 11,400 on December 31, 2002 to the lessor. The lessor however estimates that the machinery will havea salvage value of only Rs. 10,000 on December 31, 2002, The implicit rate of interest is 15% p.a. Compute the value of machinery to be recognized by the lessee and also the finance charges every year on the basis of AS19. PV Factor of 15% in three years is 2.283. (CA Final Nov. 2001) | } NDA Lid. availed a lease from Induga Ltd. on following tonne ‘@ Alease for a tenor of 3 years, in the beginning of y costing RS. 7,00,000 and which has an expected usel market value is also Rs, 7,00,000 ear 2001 for equipment ul life of 5 years, The fair 3 equal annual payments are made at end of each year. @ The property reverts back to the lessor on termination of the lease. ¢ The unguaranteed residual value is estimated at Rs. 75,000 at the end of year 2003. @ IRR = 10%, ¢@ The present value of Re. | due at the end of 3rd year at 10% rate of interest is 0.7513. @ The present value of annuity of Re. 1 due at the end of 3rd year at 10% IRR is Rs. 2.4868 (9 State with reason whether the lease constitute finance lease. (i) Calculate unearned finance incomeQS: On January 1, 2006, Milestones Ltd. sold equipment to Indu; Rs. 12,28,920. The carrying amount of the equipment on that date w The sale was a part of the package under which Induga Ltd, leased the asser Milestones Ltd. for a ten-year term. The economic life of the asset is estimated ay 10 years. The minimum lease rents payable by the lessor has been fixed at Rs. 2,00,000 payable annually beginning December 31, 2006. The incremental borrowing interest rate of Milestones Ltd. is estimated at 10% per annum. Calculate the net effect on the profit and loss account ? ga “Lid f as Rs.2,00,009 Q5: On January 1, 2006, Milestones Ltd. sold equipment to Induga Ltd, fo, Rs. 12,28,920, The carrying amount of the equipment on that date was Rs. 2,00,009, The sale was a part of the package under which Induga Ltd. leased the assert, Milestones Ltd. for a ten-year term. The economic life of the asset is esti lated at 10 years. The minimum lease rents payable by the lessor has been fixed at Rs, 2,00,000 payable annually beginning December 31, 2006. The incremental barrowing interest rate of Milestones Ltd. is estimated at 10% perannum. Calculate the net effect on the profit and loss account ? Q6:A Ltd. leased a machinery to B Lid. on the following terms. | Fair value of the machinery (Rs. in a) Lease term es Lease Rental per annum oa Guaranteed Residual value io Expected Residual value Ws Internal Rate of Return ie Depreciation is provided on Straight line method @ 10% per annum. Ascertain unearned financial income and necessary entries may be passed in the books of the Lessee in the First year. [CA Final Nov. 2004] Q7: An Equipment is leased for 3 years and its useful life and the fair market value of the equipment are Rs, 3,00 paid in 3 instalments and at the termination of leas equipment. The unguaranteed residual value at the endof (internal rate of return) IRR of the investment is 10%, factor of Re. 1 due at the end of 3rd year at 10% IRR of Re. 1 due at the end of 3rd y is 5 years, Bot] 000, The amount will g: lessor will get back the 3yearsis Rs. 40,000, The The present value of annuity is 2.4868. The present value ear at 10% rate of interest is 0.7513. h the cox (i) State with reason whether the lease constitute finance lease (i) Calculate unearned finance income. [CA Final May 2005)ce jae 20X0 Bacchus Co, wine merchants, buys a small bottling and labeling machine from Silenus atinance lease. The cash price of the machine was $7,710 while the amount to be paid was $10,000. The agreement required the immediate payment of a $2,000 deposit wih the balance being settled in four equal annual instalments commencing on 31 December 20X0. The charge of $2,290 Tepresents interest of 15% per annum, calculated on the remaining balance of the liability during each accounting period. Depreciation on the plant is to be provided for at the rate of 20% per annum on straight line basis assuming a residual value of nil. You are required to show the breakdown of each instalment between interest and capital, using the actuarial method. Acompany enters into two leasing agreements. Let us assume that it has a 90% line to estimate whether the PV of the lease payments are substantially’ equal to the fair value of the asset. LeaseA Lease B goo = $000 Fair value of asset 210 120 Estimated residual value (due to lessor) a 30 Minimum lease payments 238 108 How should each lease be classified?