HKFRS 16 Leases - Lessor Accounting - Example Fair value of leased asset = $630,000 Initial direct cost = $800 Net investment in the lease = $630,800 1/1/20X1 Dr. Lease receivable Cr. PPE Cr. Bank Initial direct cost Cr. Gain on sale of PPE Determine implicit interest rate of Lessor Year 0 -630,800 1 200,000 2 200,000 3 200,000 4 250,000 IRR = 12.613% 630,800 550,000 800 Yr LR b/f 80,000 Fin income Lease payment LR c/f 1 630,800 79,563 200,000 510,363 31/12/20X1 2 510,363 64,372 200,000 374,735 Dr. Bank 200,000 3 374,735 47,265 200,000 222,000 Cr. Finance income 79,563 4 222,000 28,000 200,000 50,000 Cr. Lease receivable 120,437 HKFRS 16 Leases - Lessor Accounting - Finance Lease Example On 1 January 20X1, Y Ltd entered into a finance lease of motor vehicle as a lessor. The fair value of the motor vehicle was $630,000 and its carrying amount was $550,000. Y Ltd incurred additional costs of $800 for arranging the lease contract. Estimated useful life of the motor vehicle is 5 years. Lease term is 4 years, and annual lease payments are $200,000 due on 31 December each year. Y Ltd expected that the machine has a residual value of $50,000 at the end of the lease term and the lessee agreed to guarantee the first $30,000 of loss for a sale below the estimated residual value. B332F Lecture Notes 2020 Spring
HKFRS 16 Leases - Lessor Accounting - Example Fair value of leased asset = $630,000 Initial direct cost = $800 Net investment in the lease = $630,800 1/1/20X1 Dr. Lease receivable Cr. PPE Cr. Bank Initial direct cost Cr. Gain on sale of PPE Determine implicit interest rate of Lessor Year 0 -630,800 1 200,000 2 200,000 3 200,000 4 250,000 IRR = 12.613% 630,800 550,000 800 Yr LR b/f 80,000 Fin income Lease payment LR c/f 1 630,800 79,563 200,000 510,363 31/12/20X1 2 510,363 64,372 200,000 374,735 Dr. Bank 200,000 3 374,735 47,265 200,000 222,000 Cr. Finance income 79,563 4 222,000 28,000 200,000 50,000 Cr. Lease receivable 120,437 HKFRS 16 Leases - Lessor Accounting - Finance Lease Example On 1 January 20X1, Y Ltd entered into a finance lease of motor vehicle as a lessor. The fair value of the motor vehicle was $630,000 and its carrying amount was $550,000. Y Ltd incurred additional costs of $800 for arranging the lease contract. Estimated useful life of the motor vehicle is 5 years. Lease term is 4 years, and annual lease payments are $200,000 due on 31 December each year. Y Ltd expected that the machine has a residual value of $50,000 at the end of the lease term and the lessee agreed to guarantee the first $30,000 of loss for a sale below the estimated residual value. B332F Lecture Notes 2020 Spring
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
How do they find the
Transcribed Image Text:HKFRS 16 Leases - Lessor Accounting - Example
Fair value of leased asset = $630,000
Initial direct cost = $800
Net investment in the lease = $630,800
1/1/20X1
Dr. Lease receivable
Cr. PPE
Cr. Bank Initial direct cost
Cr. Gain on sale of PPE
Determine implicit interest rate of
Lessor
Year 0
-630,800
1
200,000
2
200,000
3
200,000
4
250,000
IRR =
12.613%
630,800
550,000
800
Yr
LR b/f
80,000
Fin
income
Lease
payment
LR c/f
1
630,800
79,563
200,000 510,363
31/12/20X1
2
510,363
64,372
200,000 374,735
Dr. Bank
200,000
3
374,735
47,265
200,000 222,000
Cr. Finance income
79,563
4
222,000 28,000 200,000
50,000
Cr. Lease receivable
120,437
Transcribed Image Text:HKFRS 16 Leases - Lessor Accounting
- Finance Lease Example
On 1 January 20X1, Y Ltd entered into a finance lease of motor vehicle
as a lessor. The fair value of the motor vehicle was $630,000 and its
carrying amount was $550,000.
Y Ltd incurred additional costs of $800 for arranging the lease contract.
Estimated useful life of the motor vehicle is 5 years. Lease term is 4
years, and annual lease payments are $200,000 due on 31 December
each year. Y Ltd expected that the machine has a residual value of
$50,000 at the end of the lease term and the lessee agreed to
guarantee the first $30,000 of loss for a sale below the estimated
residual value.
B332F Lecture Notes 2020 Spring
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