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How figure derived

P V Gopal (Job) (127 Points)

12 September 2020

Dear Experts

Need your help in solving the below.

One informed me on lease rental as below.

But I am unable to calculate how the rent derived and residual value calculated.

Could you please guide me.

Asset Value Rs. 11,40,437

Residual Value Rs. 2,89,688

Repayment period 24 months

GST Rate @ 29.00%

Lease Rental per month Rs. 33,900

GST @ 29% Rs. 9,831

Lease rent in total per month Rs. 43,731

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2 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 12 September 2020

Initial recognition

43,731*24 months= 10,49,544₹

The current leases treatment recognises RIGHT TO USE ASSET and measured initially at full value of the minimum lease payments along with lease liability (payments).

RTU Asset a/c 10,49,544₹

To Lease liability 10,49,544₹

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 12 September 2020

I just remembered that GST is an indirect cost. So, minimum lease payments + direct costs associated with lease - Lease incentives should be recognised initially. That means

RTU Asset a/c 8,13,600 INR

To Lease lability a/c 8,13,600 INR

There is one more thing to work on, you need to discount the future lease payments into PV values. For which, one needs the PV discount rate.