Lease accounting: finance lease accounting: finance lessees: example 1: lease terminated early - entries in lessee's accounts
On the basis of the information at BLM15540 the position will be that
- the lessee sells the asset as agent for the lessor (the lease agreement normally provides for this)
- the lessor receives £42,000 sale proceeds, the first £12,000 of which is used to clear the loan
- under the terms of the lease the lessor pays the lessee a ‘terminal rebate’ (of rent) amounting to 97% of £30,000, that is £29,100.
The entries in the lessee’s accounts will be:
|Lease creditor||£11,600||Leased assets||£40,000|
|Interest on termination||£400|
|Bank||£29,100||Profit on sale||£1,100|
See BLM15550 for a reconciliation of the total cash outlaid by the lessee.