Page 421 - SBR Integrated Workbook STUDENT S18-J19

Answers

Example 6

Lessors – finance leases

The property, plant and equipment will be derecognised and a lease
receivable will be recognised. The double entry required is:

Dr Lease receivable $2.5m

Cr PPE $2.0m

Cr Profit on disposal (P/L) $0.5m

Interest income will be recorded on the receivable. Cash receipts will reduce
the value of the receivable.

1 Jan X1 Interest (5.5%) Cash receipts 31 Dec X1
$m $m $m $m
2.5 0.14 (0.5) 2.14
Interest income of $0.14 million will be recognised in profit or loss. The
receivable will have a carrying amount of $2.14 million on the statement of
financial position as at 31 December 20X1.

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