BLM15545 - 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
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the lessee sells the asset as agent for the lessor (the lease agreement normally provides for this)
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the lessor receives £42,000 sale proceeds, the first £12,000 of which is used to clear the loan
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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:
| Debit | Credit | ||
|---|---|---|---|
| Lease creditor | £11,522 | Leased assets | £40,000 |
| Interest on termination | £478 | ||
| Bank | £29,100 | Profit on sale | £1,100 |
| £41,100 | £41,100 |
See BLM15550 for a reconciliation of the total cash outlaid by the lessee.