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(a) Coups Limited availed a machine on lease from Ferrari Limited. The terms and conditions of the Lease are as under: Lease period is 3
(a) Coups Limited availed a machine on lease from Ferrari Limited. The terms and conditions of the Lease are as under: Lease period is 3 years, machine costing 78,00,000. Machine has expected useful life of 5 years. Machine reverts back to Ferrari Limited on termination of lease. The unguaranteed residual value is estimated at 750,000 at the end of 3rd year. 3 equal annual installments are made at the end of each year. Implicit Interest Rate (IRR) = 10%. Present value of 1 due at the end of 3rd year at 10% rate of interest is 0.7513. Present value of annuity of 71 due at the end of 3rd year at 10% IRR is 2.4868. You are required to ascertain whether it is a Finance Lease or Operating Lease and also calculate Unearned Finance Income with the relevant context to relevant Ind AS. (6 Marks)
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