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A lease is purchased on 1st January, 2012 for 4 years at a cost of Rs. 1,00,000. Lease is to be depreciated by the annuity method charging 5% interest. Annuity of Re.1 over 4 years charging 5% interest is Re. 0.282012. The amount of annual depreciation will be ?
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A lease is purchased on 1st January, 2012 for 4 years at a cost of Rs....
Calculation of Annual Depreciation on Lease
Given:
Step 1: Calculation of Annual Depreciation
Step 2: Journal Entries
Conclusion:
The annual depreciation on the lease for 4 years will be Rs. 1.1492 (approx) and will be charged to the Profit and Loss account every year.
Given:
- Date of Lease Purchase: 1st January 2012
- Lease Duration: 4 years
- Cost of Lease: Rs. 1,00,000
- Interest Rate: 5%
- Annuity of Re.1 over 4 years charging 5% interest: Re. 0.282012
Step 1: Calculation of Annual Depreciation
- First, we need to calculate the total amount of interest over the lease period. This can be done using the annuity of Re.1 over 4 years charging 5% interest which is Re. 0.282012.
- Interest for the first year = Rs. 1,00,000 x 0.282012 = Rs. 28,201.20
- Interest for the second year = (Rs. 1,00,000 - Rs. 28,201.20) x 0.282012 = Rs. 23,739.61
- Interest for the third year = (Rs. 71,798.80 - Rs. 23,739.61) x 0.282012 = Rs. 19,910.51
- Interest for the fourth year = (Rs. 48,059.19 - Rs. 19,910.51) x 0.282012 = Rs. 14,138.04
- The total interest over the lease period is Rs. 86,989.36
- Now, we need to divide the total cost of the lease by the total interest over the lease period to get the annual depreciation.
- Annual depreciation = Rs. 1,00,000 / Rs. 86,989.36 = Rs. 1.1492 (approx)
Step 2: Journal Entries
- The annual depreciation amount will be charged to the Profit and Loss account every year for 4 years.
- The journal entry for the first year will be:
- Depreciation A/c Dr. Rs. 1.1492
- To Lease A/c Rs. 1.1492
- The same journal entry will be passed for the next 3 years as well.
Conclusion:
The annual depreciation on the lease for 4 years will be Rs. 1.1492 (approx) and will be charged to the Profit and Loss account every year.
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A lease is purchased on 1st January, 2012 for 4 years at a cost of Rs. 1,00,000. Lease is to be depreciated by the annuity method charging 5% interest. Annuity of Re.1 over 4 years charging 5% interest is Re. 0.282012. The amount of annual depreciation will be ?
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A lease is purchased on 1st January, 2012 for 4 years at a cost of Rs. 1,00,000. Lease is to be depreciated by the annuity method charging 5% interest. Annuity of Re.1 over 4 years charging 5% interest is Re. 0.282012. The amount of annual depreciation will be ? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A lease is purchased on 1st January, 2012 for 4 years at a cost of Rs. 1,00,000. Lease is to be depreciated by the annuity method charging 5% interest. Annuity of Re.1 over 4 years charging 5% interest is Re. 0.282012. The amount of annual depreciation will be ? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A lease is purchased on 1st January, 2012 for 4 years at a cost of Rs. 1,00,000. Lease is to be depreciated by the annuity method charging 5% interest. Annuity of Re.1 over 4 years charging 5% interest is Re. 0.282012. The amount of annual depreciation will be ?.
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