12-08-2004, 06:10 PM
Hi
I have a problem in lease accounting...while preparing lease amoritization schedule...if the fair value of leased asset is less than present value of MLP then what figure will we use?
present value of MLP or fair value of Asset...
also in this type of problem the interest rate use is calculated by trail and error method...what is this trail and error method?
I am pasting the original problem..
A lease was signed on Jan 1, 2001 for four years. Annual rentals payable at beginning of each year were agreed at Rs 13000. Lessor's implicit rate is not known. The lessee's incremental borrowing rate is 20%. Fair value of equipment was Rs 40000.
Bargain purchase option is Rs 1500.
now in this problem the Present Value of MLP will be Rs 41107.62.
the fair value of asset is Rs 40000.
in lease amoritization schedule what figure will be used...Rs 41107.62 or Rs 40000
also the interest rate that will be use in lease amoritization schedule will be calculated by trail and error method...that worked out to be 22.53145%...how it is calculated...and y is it used instead of 20%.
Ace
I have a problem in lease accounting...while preparing lease amoritization schedule...if the fair value of leased asset is less than present value of MLP then what figure will we use?
present value of MLP or fair value of Asset...
also in this type of problem the interest rate use is calculated by trail and error method...what is this trail and error method?
I am pasting the original problem..
A lease was signed on Jan 1, 2001 for four years. Annual rentals payable at beginning of each year were agreed at Rs 13000. Lessor's implicit rate is not known. The lessee's incremental borrowing rate is 20%. Fair value of equipment was Rs 40000.
Bargain purchase option is Rs 1500.
now in this problem the Present Value of MLP will be Rs 41107.62.
the fair value of asset is Rs 40000.
in lease amoritization schedule what figure will be used...Rs 41107.62 or Rs 40000
also the interest rate that will be use in lease amoritization schedule will be calculated by trail and error method...that worked out to be 22.53145%...how it is calculated...and y is it used instead of 20%.
Ace
