Question

Pass a journal entries in the books of lease contract by creating lease receivable at its net investment in which is equal to the minimum lease payments discounted at the rate of interest implicit in the lease.

Answer 1

The lessor shall record the start of lease by creating a lease receivable at its net investment in lease which is equal to the minimum lease payment discounted at the rate of interest implicit in the lease.

Journal entry

Lease receivable --------------- Dr

To Assets A/c

At the time of first payment lessor shall record receipt of cash, reduction in lease receivable and recognition of finance income.

Journal Entry

Cash A/c ----------------------------------Dr

To Lease receivable A/c

To Finance income

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