These amounts have both been recognised as revenue on the basis that this is effectively lease income. Is this correct? Explain with calculations
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we have leased a fleet of 15 motorbikes to a customer - Xander Plc over a three year term. There was an initial upfront payment of £100,000. Annual lease payments are receivable in arrears on 30 September each year. The normal selling price of the whole fleet of bikes is £1.8 million. After the 3 year lease term is complete, the customer has the option to pay a fixed amount and take legal ownership of the fleet but until then, JJ Victory retains legal title. We have received the upfront payment of £100,000 and the first of the lease payments on 30 September 2021. These amounts have both been recognised as revenue on the basis that this is effectively lease income.
Is this correct? Explain with calculations
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