[rakhi2rakhi]

thank you sir for your reply. sir what if Fair value ( say £2000) is less than the minimum lease payment (£2500).We cannot record liability with fair value as we have obligation to pay the lessor the amount in the lease contract. Therefore will the double entry be as follows ?
Dr finance lease asset – 2000
Dr st of profit and loss – 500
Cr finance liability – 2500

If it is true sir then just wanted to know that is £500 taken to to profit and loss in the first year or divided by the lease term (say 5 years) and just £100 is taken to P&L account and rest in later years

I know i am sounding bit silly but sir this is going on in my head since last few days.

Sir please help.

[rakhi2rakhi]

thank you sir

[rakhi2rakhi]

Thank you sir for the detailed explanation. You make students life so much easy.

Many thanks once again !

[rakhi2rakhi]

Hi Farzana
I am not a tutor but thought of replying to your question:
When any CLT is made including within 7 years prior to somebody’s death IHT (Inheritance tax) is payable when it is made but when PET is made during those 7 years the person doesn’t know that he will die and does not pay any IHT when PET is made within 7 years prior to death. So when life time chargeable transfer on death is done( when person dies), all chargeable transfer during 7 years prior to death is taken into account. Therefore IHT is calculated for both PET and CLT made during those 7 years, but since the person has already paid IHT when CLT was made so it is deducted as life time tax paid from CLT that is calculated on death. IHT was never paid when PET was done. I hope it makes sense.
All the best !

[rakhi2rakhi]

Thank you 🙂

[rakhi2rakhi]

hello John
I understand that NRV for above question is 3500 but it said that 4000 which he took into account is illegal. Now to rectify, it cost 2500 and therefore NVR is less than initially charged £ 4000
My question is why did it say that charging 4000 was illegal.. Because it was illegal and he had to rectify it for 2500 NRV was lower than 4000. I just dont understand why 4000 initially charged was illegal. Shouldn’t he charge 4000 initially,

Awaiting your reply

[rakhi2rakhi]

hello John
In the above example it is asked what was the closing balance on the purchase ledger control account. Should it not be payable ledger control account ?

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