International Accounting Standards

Lease Case D5

The Company Pulphass S.A. de C.V: it is dedicated to the production of avocado pulp mainly for the export market. For its operation, it requires having 3 3.5-ton trucks that have a freezing chamber and that allow it to transfer its orders from its plant in Morelos to the ports of Manzanillo and / or Veracruz.

For which, contact the company Anhuac S.A. de C.V. that is dedicated to the distribution, sale and leasing of this type of freezing equipment for food distribution and the cost at which they buy this type of equipment from the manufacturer is for $ 332,500.

Both companies have reached an agreement to lease the three units for a period of 4 years, with a quarterly rent of $ 32,500 pesos for each of the units. Payments will be made at the beginning of each of the quarters.

The agreement establishes a purchase option at the end of the lease period for an amount of $ 45,000 for each of the units that include both the truck and its freezer chamber.

The Pulphass Company has not defined whether at the end of the lease contract it will exercise the option to purchase the units, but taking into account the residual value established in the agreement, it is very feasible that it will acquire them.

The Pulphass purchasing manager, quoted with an automotive dealer what could be the current cash purchase value of a unit such as those that are being rented and the value obtained was $ 475,000 per unit.

The useful life of this type of asset is estimated at 5 years

The incremental financing rate at which Pulphass would have access to a loan for the value of the three units, in pesos and for a term of 4 years, is 12% per year.

It asks:

- Make the records in G / L accounts of the company Pulphass S.A. de C.V, as well as the financial calculations necessary to determine the accounting record both for its initial recognition and its subsequent recognition during the contract period, assuming that at the end of the contract, the company exercises the purchase option

- Make the records in G / L accounts of the company Anhuac S.A. de C.V, as well as the financial calculations necessary to determine the accounting record both for its initial recognition and its subsequent recognition during the contract period, assuming that at the end of the contract, the lessee exercises the purchase option