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Example: A company leased an asset to another company on 1 January 20X1 on the following terms. Lease term 4 years Inception of lease 1.1.X1

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Example: A company leased an asset to another company on 1 January 20X1 on the following terms. Lease term 4 years Inception of lease 1.1.X1 Annual instalments in advance Rs. 22,000 Rs. 10,000 Residual value of asset as guaranteed by lessee Expected residual value at end of lease Rs. 12,000 Fair value of the asset Rs. 82,966 Initial direct costs incurred by the lessor Rs. 700 Interest rate implicit in the lease 11% Requirements a) Calculate the unguaranteed residual value and the net investment in the lease as at 1 January 20X1 b) Prepare extracts from the financial statements of the lessor for the year ended 31.12.X1 (excluding notes)

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