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Example On Operating Lease and Finance Lease
Example On Operating Lease and Finance Lease
Example On Operating Lease and Finance Lease
finance lease
COMPANY A takes an asset on lease for a period of 5 years with
rental payment of Rs.5,00,000 per year. Appropriable lease
interest is 6% and assuming the else payments are made at the
end of each year. Salvage value is taken as 0 and useful life is
taken as 5 years. Straight line depreciation method is used
OPERATING LEASE.
year CFO
0 5,00,000
1 5,00,000
2 5,00,000
3 5,00,000
4 5,00,000
5 5,00,000
Financing lease
PV of the Balance sheet liability=500000(1-(1+r)^-t)/r=Rs.21,06,181.9
year beginning interest expense lease payments principal lease liability book value of the assets
leasehold value amount
0 21,06,181.90 16,84,945.52
Ratio Impa
Parameter finance lease operating
lease
I
mpact on cash flow