Finance Lease

Lessor’s Books

Additional Practice
Que.01 (RTP)
Kasyapa Ltd. Has taken an asset on lease from Varuna
Ltd. for a period of 3 years. Annual Lease Payments are
Rs. 6 Lakhs payable at the end of every year. The
Residual Value guaranteed by Kasyapa is Rs.2 Lakhs
whereas Varuna expects the estimated Salvage Value to
be Rs. 5 Lakhs at the end of lease term. If the Fair Value
of the asset at the lease inception is Rs. 15 Lakhs and the
implicit interest rate in the lease is 12%,
Compute the Net Investment in the Lease from the
viewpoint of Varuna Ltd. and the Annual Finance
Income.

Que.02 (Past Exam)

Athri Ltd has leased an equipment over its useful life that
costs Rs.7,46,55,100 for a three year lease period. After
the lease term, the asset would revert to the Lessor. You
are informed that –
a) UGRV would be Rs.1 Lakh only
b) The Anuual Lease Payments have been structured in
such a way that the sum of their Present Values
together with that of the Residual Value of the asset
will equal the cost thereof.
c) IIR is 10%
You are required to ascertain Annual Lease
Payment and the Unearned Finance Income. PV
Factor @10% for the year 1 to 3 are 0.909, 0.826 and
0.751 respectively.
Que. 03 (RTP & Past Exam)
Gautham Ltd. has initiated a lease for three years in
respect of an equipment costing Rs.1,50,000 with
expected useful life of 4 years. The asset would revert to
Global Ltd. under the lease agreement. Other information
is as follows:-
a) UGRV Rs.20,000
b) IIR is 10%
c) The Annual lease payments have been determined in
such a way that the Present Value of the Lease
Payment plus the Residual Value equal to the cost of
asset.
Ascertain in the hands of Gautham Ltd.
a) Annual Lease Payment
b) Unearned Finance Income
c) Segregation of Finance Income