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- This topic has 2 replies, 3 voices, and was last updated 12 years ago by awan1.

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- March 31, 2012 at 2:07 am #52057
hye everyone.

how to calculate interest for finance lease if they give

1. the date of purchase and cost.

2.months for rental.thanks. i hope someone can help me 😀

April 10, 2012 at 11:33 am #95945hello

please follow the step as under

1

Read and understand the lease contract.

2

Find the market value of the equipment or vehicle being leased. Every lease is different, so the location of this number will vary, but it should be in the document somewhere. For the sake of this hypothetical example, we will assume the equipment is a large fuel tanker with a market value of $100,000.3

Find the residual value of the tanker in the lease document. For illustrative purposes, assume the residual value of the tanker is $20,000.4

Find the payment terms of the lease, for example, $1,800 per month for five years.5

Subtract the residual value from the market value: $100,000-$20,000=$80,000.6

Find the amortization per month amount by dividing $80,000 by 60 months. This equals $1,333.7

Subtract $1,333 from the total monthly payment of $1,800 to get a monthly interest expense number of $467.8

Multiply $467 times 12 to get an annual interest expense number of $5,604.9

Divide $5,604 by $80,000, the amount financed, to get 0.07, or a 7 percent annual interest rate.April 10, 2012 at 5:50 pm #95946kindly let me clear that how you linked the amortization with the lease payments.. i couldnt get it.. whats the link between the monthly amortization of 1333 with the monthly lease payment of 1800

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