Question: Simson Limited (SL) has a mining equipment with carrying amount 1,20,000 and useful life of the equipment is 5 years. On April 1, 2006 SL

Simson Limited (SL) has a mining equipment with carrying amount ₹1,20,000 and useful life of the equipment is 5 years. On April 1, 2006 SL enters into a package deal with a Sigma Finance Limited (SFL) whereby it sells the equipment to SFL with the condition to take the equipment on lease by paying an annual lease rent of Rs 40,000 per annum. The incremental borrowing cost of SL is 12% per annum. Show how vendor–lessee should recognize it in its books of accounts.

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