Sale and lease back under finance lease

[faisal_desperado]

The following have been calculated based on given data, detail being omitted, assumptions,where taken, being shown against each.
IRR is 25%
Assuming PV of asset Rs. 500,000, as given
Minimum lease payments are 614,754
Annual rental payment (assuming in advance)Rs. 204,918

In the books of Lessee, Entries for the first year.
<b>At the time of sale</b>
Cash -----------------------------400000Debit
Asset-----------------------------300000Credit
Surplus on revaluation------------100000Credit
Assuming application of section 235 of Company ordinance 1984.

<b>Asset acquired on finance lease</b>
Asset under finance lease---------500,000Debit
Liablity Under finance lease------500,000Credit

<b>First lease payment</b>
Liablity under finance lease------204918Debit
cash------------------------------204918Credit

<b>At the end of the year</b>
Interest Expense------------------73770Debit
Interest Payable------------------73770Credit

<b>second Annual rental payment</b>
Interest payable------------------73770Debit
Liablity under finance lease------131148Debit
Cash------------------------------204918Credit

These entries have been made from lessee's perspective, Depreciation entry is also required to be made forthwith other entry at the end of the year.In my opinion, from the lessor's perspective entries will not be difficult for you.

Best Regards,