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I’m a bit confused by the answers for the following question as LSBF have completely ballsed up the answers!
Q – today’s date is 30 September 2010 and I’m preparing an income statement and a statement of financial position.
On 1 October 2009 Philpotts purchased an item of plant for £56m which it leased to a customer on the same date. The lease period is four years with annual rentals of £16m in advance. The plant is expected to have a nil residual value at the end of the four years. Philpotts has been advised that this is a finance lease with an interest rate of 10% per annum.
If I am Philpotts how do I record this? I sort of know but want to know what the journals are to get my head round it.
The trial balance shows
Plant of lease to customer at cost – 56,000
Rental income from plant – (16,000)I have got to the following:
Period Bal b/fwd Cash Paid Capital Outng Int Bal c/fwd
1 56,000 (16,000) 40,000 4,000 44,000
2 44,000 (16,000) 28,000
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