Using the data of Problem 1, allocate the receivable from finance lease as to finance income and

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Using the data of Problem 1, allocate the receivable from finance lease as to finance income and reduction in principal amount of the receivables to be recognized by the lessor over the lease term of four years.

Data from Problem 1

Jeevan Limited (JL) a lease finance company leased a transport vehicle to Zubin Transport Company (ZTC). The initial cost of the vehicle on April 1, 2008 is ₹16,00,000. The lessee– ZTC has agreed to pay equated lease rent at the end of each of the year over next four years. At the end of the lease term, ZTC has the option to buy the vehicle at an estimated residual value of ₹2,00,000. The agreement of lease provides that either ZTC will buy the vehicle at the end or will arrange for an alternate buyer to buy the vehicle at the estimated residual value. The commercial rate of interest applicable for the lessor is 10% per annum. Estimate the minimum lease rent acceptable to the lessor.

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Financial Accounting

ISBN: 9780071078023

1st Edition

Authors: Dhanesh K. Khatri

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