Urgent!!

Question 1

Three steps for sale and leaseback: recognition

Answer 1

1. Calculate proportion retained as ROUA: PVFLP/FV of asset. The rest has been transferred to the buyer.
2. Calculate CV of ROUA retained: original CV x % retained.
3. Calculate the gain on disposal on the part transferred (balancing % above x full gain on disposal)

Double entry:
1.DR cash (proceeds) 1,500,000
3.DR ROUA (CV of ROUA retained from above) 572,670
4.CR Lease Liability (PVFLP) 850,865
2.CR PPE (old CV - to remove) 1,010,000
5.CR Gain/Loss (bal fig) 211,805

THEN hold at amortised cost: TABLE!!!