How to calculate the Financial Lease

Started by TechShristi, December 09, 2013, 08:20:44 am

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TechShristi

December 09, 2013, 08:20:44 am Last Edit: December 09, 2013, 08:33:56 am by TechShristi
According to Accounting Standard 19: A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time. There are two types of lease as follow:


       
  • Finance lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset.

  •    
  • An operating lease is a lease other than a finance lease.


CALCULATION PART OF FINANCIAL LEASE IN BOTH LEESE AND LESSORS

In case of Leese books of account

Step1.  First of all, recognized the amount to be recorded for the leased assets. The amount would be higher of the following:



       
  • Present value of Minimum Lease payment received over the lease time.

  •    
  • Fair value of leased assets (generally given in the question itself)

Consider the highest amount and record the leased assets at that amount in the books of accounts.

Step2. After Recognizing the amount, prepare the table as shown below:









Serial No.Minimum Lease PaymentFinancial Charges Reduction in O/S liability Reduction in O/S liability


Suppose amount recognized for lease amount is 350000 with a lease payment of 150000 @ 15% p.a then table would be like this

http://img.techshristi.com/images/embroideryshristi/mlp.jpgHow to calculate the Financial Lease
It is easy to calculate the Financial lease from the standpoint of lessor as compared to financial lease from the stand point of Leese.

In case of Lessor books of account

Step1. Calculate the Gross Investment. Gross investment would be Minimum lease payment from the stand point of Lessor + Unguaranteed resuidal value from the standpoint of lessor that is

Lease payment + Guaranteed residual+ UN-guaranteed residual + additional residual by third party (if any) - Contingent rent (if any)- Cost of service and Tax (if any)

Step2. Unearned lease = Gross investment - Present Value of Gross investment

Step3. Net investment in lease = Gross Investment - unearned lease income

Now consider the above '
Net investment in lease' amount and solve the problem as per the table given in above images or section.

In case of any problem or if i am wrong at some points or section then please leave a reply over here. It may be possible that i have made a typo mistake but it would not be intentional mistake, so correct me if i m wrong. Leave your query over here our team member will try to solve it as soon as possible
.

TechShristi

December 09, 2013, 08:20:44 am Last Edit: December 09, 2013, 08:33:56 am by TechShristi

georgenelson

Thanks for sharing this Financial Calculation to all. I came to know how to solve some calculation.

Mr. Patel

Quote from: georgenelson on June 25, 2014, 06:03:44 pm
Thanks for sharing this Financial Calculation to all. I came to know how to solve some calculation.


Welcome to Techshristi my dear friend..

I think you are new to this forum.

If you have any query then feel free to share on this forum and even keep sharing your knowledge with others.

Have a nice day....

Mr. Patel


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