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sale and lease back -above fair value sum

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › sale and lease back -above fair value sum

  • This topic has 3 replies, 2 voices, and was last updated 10 months ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • August 8, 2021 at 6:09 am #630712
    prakasa@123
    • Topics: 5
    • Replies: 2
    • ☆

    hi,

    Bungle Co sells a building to the Zippy Co for $800,000 cash. The carrying amount of the building prior to
    the sale was $600,000. Bungle Co arranges to lease the building back for five years at $120,000 per
    annum, payable in arrears. The remaining useful life is 15 years. At the date of sale the fair value of the
    building was $750,000 and the interest rate implicit in the lease is 4%. The cumulative present value of $1
    in five years’ time is $4.452.
    The transaction satisfies the performance obligations in IFRS 15, so will be accounted for as a sale and
    leaseback.

    i am unable to solve this question can you help me in solving it.

    Thank you.

    August 8, 2021 at 10:28 am #630754
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Hi,

    I’ll help you solve it if you show me how you’ve solved it first. I’m not here to just solve the questions for you, you must attempt them first. Once you’ve done so then I’d be more than happy to help you out.

    Thanks.

    August 8, 2021 at 4:22 pm #630816
    prakasa@123
    • Topics: 5
    • Replies: 2
    • ☆

    firstly i have done as it a on a market terms ie fair value then as it is above i added excess 50000 to lease liability and bank

    dr bank 750000

    dr rou 427392

    cr lease 534240
    cr asset 600000

    cr gain 43152

    dr bank 800000
    dr rou 427392
    cr asset 600000
    cr lease liability 584240
    cr gain 43152
    than you.

    August 19, 2021 at 10:27 pm #632275
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6119
    • ☆☆☆☆☆

    Hi,

    Where have you got all of the figures from, please? I’d need to see the workings and some narrative explanation to fully understand what you are doing.

    Thanks

  • Author
    Posts
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