A motor dealer acquires vehicles of a particular model from the manufacturer for Rs. 21,000, a 20% discount on the recommended retail price of
A motor dealer acquires vehicles of a particular model from the manufacturer for Rs. 21,000, a 20% discount on the recommended retail price of Rs. 26,250. It offers them for sale at the recommended retail price with 0% finance over three years, provided three annual payments of Rs. 8,750 are made in advance. The market rate of interest is 8%. A sale transaction made on 1 January 20X5 is recognised as a combination of an outright sale and a finance lease. The present value of the minimum lease payments is treated as the consideration for the outright sale and at 8% is calculated as follows: Year 20X5 20X6 20X7 Cash flow Rs. 8,750 8,750 8,750 Discount factor at 8% 1.000 1 (1.08)= 0.926 1 (1.08)2=0.857 Present value Rs. 8,750 8,102 7,499 24,351 Requirement How should the transaction be recognised by the dealer in the year ending 31 December 20X5?
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Step 1 As per Ind AS 116 Leases In case the lessor is the manufacturer or dealer lessor then the sal...
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Authors: Christian Albright, Wayne Winston, Christopher Zappe
4th Edition
538476125, 978-0538476126
