In this video we will be solving Question 6(a) of CA Inter Exam May 24 Adv. Accounting Paper. #cainter #caintersuggestedanswers
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CA Inter Suggested Answers | May 24 Advanced Accounting
Colour Limited leased a Machine the following terms: to Red Limited on 1st April, 2021 on the followings terms:
Cost of the machine ₹ 18,00,000
Lease term 3 years
Fair market value of the machine ₹ 18,00,000
Unguaranteed residual value as on 31.3.2024 ₹ 2,00,000
Internal rate of return 12%
Other information:
The expected useful life of the machine is 5 years. The machine will revert to Colour Limited on termination of the lease. The lease payment is to be made at the end of each year in 3 equal parts.
The present value of ₹ 1 due at the end of 3rd year at 12% rate of interest is ₹ 0.7118. The present value of annuity of 1 due at the end of 3rd year at 12% IRR is ₹ 2.4018.
You are required to analyze whether lease constitutes finance lease. Also calculate unearned finance income, if any.
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