• 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 >>

Sale and Leaseback Question

Forums › ACCA Forums › ACCA SBR Strategic Business Reporting Forums › Sale and Leaseback Question

  • This topic has 2 replies, 3 voices, and was last updated 1 year ago by fredymaila.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • September 21, 2021 at 3:23 am #636082
    yyong
    Member
    • Topics: 2
    • Replies: 0
    • ☆

    A company purchased an a asset on 1.1.x1 for $100,000, with a life of 5 years. On 1.1.x3 they sell the asset to a lessor company for the fair value of $70,000 and lease it back for 2 years with annual lease payment of $20,000 and guranteed residual value of $15,000. The lease has a rate of return of 10%. The amount to be recognised as right of use asset is?

    May I know how to calculate the right of use asset for this question?

    August 18, 2023 at 6:29 am #690132
    joelstanlee
    Participant
    • Topics: 0
    • Replies: 1
    • ☆

    Dr. Cash (Sale amount) 70,000
    Dr. Right of Use asset (Carrying value * % of right retained) 17,144
    Dr. Loss (Initial loss * % of right transferred) 7,857
    Cr. Non-Current Asset (Note 1) 80,000
    Cr. Lease Liability (PV of future payments – value provided in question) 15,000

    Note 1: Calculating the carrying value of the asset

    Value on 1/1/XXX1 100,000
    Less: Depreciation (Value of the asset on 1.1.XXX3/ Useful life of the asset) = 20,000
    Carrying value of the asset = 80,000
    Initial Loss = 10,000

    Note 2: Calculation of percentage of right retained & right transferred

    Present Value (already provided in question) = 15,000
    Sale Price = 70,000
    Percentage of Right Retained (PV/Sale Price*100) = 21.43
    Percentage of Right Transferred (100 – % of right retained) = 78.57

    March 4, 2024 at 3:35 pm #701945
    fredymaila
    Participant
    • Topics: 48
    • Replies: 130
    • ☆☆

    Not true.

    Let me help you.

    A sale recognises cash of $70,000 and derecogises carrying amount of $60,000 (100,000 – 2 yrs depreciation: 1000,000 / 5 x 2)

    Then, a lease recognises lease liability as PV of future lease payments:
    20,000/1.1 + (20,000+15,000)/1.1² = 47,107

    For ROUA, take a proportion of rights retained as
    Carrying amount of asset x
    [Lease liability / Sale at FV]
    = 60,000 × [47,107 / 70,000]
    = 40,378

    DR Cash. 70,000
    DR Right-of-use asset (ROUA) 40,378
    CR Carrying amount of asset. 60,000
    CR Lease liability 47,107
    CR Gain (SOPL)(Bal. figure) 3,271

  • Author
    Posts
Viewing 3 posts - 1 through 3 (of 3 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

  • MikeLittle on Civil Law, Common Law, Criminal Law – ACCA Corporate and Business Law (LW) (ENG)
  • beata443c on Civil Law, Common Law, Criminal Law – ACCA Corporate and Business Law (LW) (ENG)
  • heary123@ on Group SFP – Unrealised profit and inventory in transit – ACCA Financial Reporting (FR)
  • heary123@ on Group SFP – Unrealised profit and inventory in transit – ACCA Financial Reporting (FR)
  • John Moffat on PM Chapter 15 Questions Financial Performance Measurement

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