• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

Gross Investment In Lease

Forums › Ask CIMA Tutor Forums › Ask CIMA F2 Tutor Forums › Gross Investment In Lease

  • This topic has 1 reply, 2 voices, and was last updated 5 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • February 9, 2020 at 6:25 pm #561200
    moonman
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    Hello.

    I’m currently using the BPP Exam Kit for F2.

    The following question has me confused:

    JK leases an asset to LM on 1 January 20×1 under a five year finance lease. Lease installments of 100 000 are payable annually in advance commencing 1 Jan 20×1. The total expected residual value at the end of the lease term is 30 000 of which 25 000 is guaranteed. The interest rate is 8%.

    What is the amount of the initial investment in the lease that the lessor should recognise at 1 Jan 20×1?

    The answer is given as 351630, which they get by adding the PV of the installments (100000 x 3.312) the PV of the residual guarantee (25000 x 0.681) and the PV of the unguaranteed Residual Value (30000-25000 x 0.681).

    My confusion is due to the addition of the guaranteed residual value. When calculating the gross investment in the lease do we not only add the unguaranteed residual value to the present value of the installments?

    Thank you, sorry if its a bit long.

    February 12, 2020 at 9:44 pm #561573
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7156
    • ☆☆☆☆☆

    Hi,

    When the lease finishes the asset is returned to the lessor and they receive the value of the asset, guaranteed amount. The asset is worth more than this as there is also the unguaranteed amount that also needs discounting back to present value.

    Thanks

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • DuDE on Inventory Control (part 1) The EOQ Formula – ACCA Management Accounting (MA)
  • Nabiha on FA Chapter 2 Questions The Statement of Financial Position and Statement of Profit or Loss
  • John Moffat on The Statement of Financial Position – ACCA Financial Accounting (FA) lectures
  • Bainamura on The Statement of Financial Position – ACCA Financial Accounting (FA) lectures
  • kadamova.f@gmail.com on Associates (IAS 28) – PUPs – ACCA Financial Reporting (FR)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in