Questions on Leasing

1 Lessee Ltd leased plant costing Rs xxx crores from Lessor Ltd for a tenor of 5 years (usef
was 10 years). The monthly lease rent was 1.25% of Rs xxx crores. No buy options for Le

Direct costs of 0.50% of Rs xxx cr were incurred by Lessee Ltd and 0.65% of Rs xxx by Les

What type of a lease is this and why

Show extracts from the two companies P&L and Balance Sheet for day one and years on

2 Suppose the above lease had been for a tenor of 8 years, what would be your stand why
Show extracts from the two companies P&L and Balance Sheet for day one and years on

3 Seller Ltd had a plant with carrying value of Rs yyy crores. This was sold to Leasing Ltd fo
and leased back for a tenor of 3 years, the lease rent being Rs 0.06yyy crores per month
is a finance lease
Show extracts from the two companies P&L and Balance Sheet for day one and years on

4 If the lease in question 3 above had been an operating lease

Show extracts from the two companies P&L and Balance Sheet for day one and years on

Questions on Forex
1 Importer Ltd bought machinery costing USD zzz million on Jan 5, 2013 from a German ve
This was paid on May 6, 2013
The machine was installed on Feb 15, 2013
Depreciation was charged at 6% straight line
Show extracts from the two companies P&L and Balance Sheet for day one and years on
Assume functional currency of the German company to be EUR
Get forex data from www.oanda.com

2 If the above payment was funded by a USD loan of equivalent amount from SBI, and this
was to be repaid in 100 monthly instalments and carried an interest of 5%
Show extracts from Importer Ltd P&L and Balance Sheet for all relevant dates upto June
Assume USD INR on June 30, 2013 to be Rs 61.05

Other dates get data from www.oanda.com

3 Exporter Ltd sold product for USD aaa million on Oct 31, 2012
It received 25% on Dec 5, 2012; another 50% on Jan 15, 2013
Show extracts from Exporter Ltd P&L and Balance Sheet for all relevant dates upto June
Assume USD INR on June 30, 2013 to be Rs 61.05
Other dates get data from www.oanda.com
All the above questions are indicative
I want you to tailor the question to your Group
The following logic to be adopted
Let all alphabets be serially numbered 1 to 26
Take the first alphabet of your surname (each member of the Group)
Work out the average number

This is the number that will replace xxx, yyy, zzz and aaa above
If any information is found to be inadequate, please make your own assumptions and add to the av

enor of 5 years (useful life of the plant

No buy options for Lessee Ltd

.65% of Rs xxx by Lessor Ltd

day one and years one to five

uld be your stand why

day one and years one to eight

sold to Leasing Ltd for Rs 1.5yyy crores

yyy crores per month. Assuming this

day one and years one to three

day one and years one to three

13 from a German vendor

day one and years one to three

unt from SBI, and this loan

vant dates upto June 30, 2013

vant dates upto June 30, 2013

ons and add to the available information

CALCULATION OF VALUE OF UNKNOWNS like aaa, xxx, yyy, zzz

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z

Divya
Priti
Chandan
Poojan
Swagtam
Averge

Mohan
Sahay
Agrawal
Shah
Chakravarty

13
19
1
19
3
11

a, xxx, yyy, zzz

Lessee Ltd leased plant costing Rs xxx crores from Lessor Ltd for a tenor of 5 years (useful life of the
was 10 years). The monthly lease rent was 1.25% of Rs xxx crores. No buy options for Lessee Ltd
Direct costs of 0.50% of Rs xxx cr were incurred by Lessee Ltd and 0.65% of Rs xxx by Lessor Ltd
What type of a lease is this and why
Show extracts from the two companies P&L and Balance Sheet for day one and years one to five

This is an operating lease, since life of the plant is 10 yrs but lease is valid only for 5 yrs( 50 % of t
Also, there is no provision to buy the plant. So , it is a case of opertaing lease.
Assumption :
1)The direct Cost incurred by Lessee Ltd is 5 % each year on the historical cost of asset.
2)The direct Cost incurred by Lessor Ltd is 6.5 % each year on the historical cost of asset.
3) The deprecdiation method used is "Straight line method" with asset life = 10yrs
Cost of Plant
Lease rental
1.25%
Direct cost to Lessor
6.50%
Direct cost to Lessee
5.00%
Yearly deprecciation (Assuming SL)

11 cr

Lessor Ltd. Balance Sheet

Assset
Plant

Liability

1.1 crore
After 1 Day

11

P/L
No Lease related entry

After 1 yr
Lessor Ltd.
Liability

Assset
Plant
less: acc. Depn
Net

11
1.1
9.9

P/L
Revenue
ABC
Interest Income
1.65
less: Direct expenses
0.715
GrosS Income
BBB
less: Depcretion
1.1
EBIT
CCC
After 2 yr
Lessor Ltd. Balance Sheet
Assset
Plant
less Deon
Net

Liability

11
2.2
8.8

P/L
Revenue
ABC
Interest Income
1.65
less: Direct expenses
0.715
GrosS Income
BBB
less: Depcretion
1.1
EBIT
CCC
After 3 yr
Lessor Ltd.
Liability

Assset
Plant
less:Accm. Deon
Net
P/L

Revenue
ABC
Interest Income
1.65
less: Direct expenses
0.715
GrosS Income
BBB
less: Depcretion
1.1

11
3.3
7.7

EBIT

CCC

After 4 yr
Lessor Ltd.Balnce Sheet
Assset
Plant
less:Accm. Deon
Net

Liability

11
4.4
6.6

P/L
Revenue
ABC
Interest Income
1.65
less: Direct expenses
0.715
GrosS Income
BBB
less: Depcretion
1.1
EBIT
CCC

After 5 yr
Lessor Ltd.Balnce Sheet
Assset
Plant
less:Accm. Deon
Net

Liability

P/L
Revenue
ABC
Interest Income
1.65
less: Direct expenses
0.715
GrosS Income
BBB
less: Depcretion
1.1
EBIT
CCC

11
5.5
5.5

of 5 years (useful life of the plant

uy options for Lessee Ltd

% of Rs xxx by Lessor Ltd

one and years one to five

alid only for 5 yrs( 50 % of the lifetime)

al cost of asset.
ical cost of asset.
ife = 10yrs

Liability
No change

Lessee Ltd. Balance Sheet

Assset
No change
P/L

No Lease related entry

Liability
No change

Lessee Ltd.
Assset
No change

P/L
Rent Expense
Direct expenses

Liability
No change

1.65
0.55

Lessee Ltd.Balance Sheet

Assset
No change

P/L
Rent Expense
Direct expenses

1.65
0.55

Lessee Ltd.
Liability
Assset
No change due to lease
No change

P/L
Rent Expense
Direct expenses

1.65
0.55

Lessee Ltd.Balnce Sheet

Liability
Assset
No change due to lease
No change

P/L
Rent Expense
Direct expenses

1.65
0.55

Lessee Ltd.balnce sheet

Liability
Assset
No change due to lease
No change

P/L
Rent Expense
Direct expenses

1.65
0.55

Suppose the above lease had been for a tenor of 8 years, what would be your stand why

If lease is for 8 years and the useful life is 10 years. The %age of lease peiod to useful life is 80%
It will be treated as finance lease
Cost of Plant
110,000,000.00
Lease rental @
1.25%
1,375,000.00
Direct cost to Lessor
6.50%
Direct cost to Lessee
5.00%
yearly deprecciation (Assuming SL)

Plant Value after 8 y

Implicit rate

11000000

Salvage vale
After signing lease

Lessor Ltd.
Liability

Assset
Lease recv

110,000,000.00

P/L
No change

After 1 year
Lessor Ltd.
Liability

Assset
Lease recv
Cash

P/L
Interest Income 4,882,894.13
Direct cost
7,150,000.00

98,382,894.13
1,375,000.00

After 2 years
Lessor Ltd.
Liability

Assset
Lease recv
Cash

86,212,378.30
1,375,000.00

P/L
Interest Income 4,329,484.17
Direct cost
7,150,000.00

After 3 years
Lessor Ltd.
Liability

Assset
Lease recv
Cash

73,462,089.44
1,375,000.00

P/L
Interest Income 3,749,711.14
Direct cost
7,150,000.00

after 4 yeasr
Lessor Ltd.
Liability

Assset
Lease recv
Cash

P/L
Interest Income 3,142,319.16
Direct cost
7,150,000.00

60,104,408.60
1,375,000.00

after 5 years
Lessor Ltd.
Liability

Assset
Lease recv
Cash

46,110,401.15
1,375,000.00

P/L
Interest Income 2,505,992.55
Direct cost
7,150,000.00

After 6 years
Lessor Ltd.
Liability

Assset
Lease recv
Cash

31,449,754.07
1,375,000.00

P/L
Interest Income 1,839,352.92
Direct cost
7,150,000.00

After 7 years
Lessor Ltd.
Liability

Assset
Lease recv
Cash

P/L

16,090,710.31
1,375,000.00

Interest Income 1,140,956.24

Direct cost
7,150,000.00

After 8 Years
Lessor Ltd.
Liability

Assset
Lease recv
Cash

P/L
Interest Income 409,289.69
Direct cost
7,150,000.00

0.00
1,375,000.00

Show extracts from the two companies P&L and Balance Sheet for day one and years one to eight

Assumption :
o useful life is 80%
1)The direct Cost incurred by Lessee Ltd is 5 % each year on the historical cost of ass
2)The direct Cost incurred by Lessor Ltd is 6.5 % each year on the historical cost of a
3) The deprecdiation method used is "Straight line method" with asset life = 10yrs
Plant Value after 8 year
22000000
Implicit rate
0.389%

Salvage vale

22000000
Lessee Ltd.

Liability
Asset
Lease payable 110,000,000.00 Plant

110,000,000.00

P/L
No change

Lessee Ltd.
Liability
Lease payable

Asset
98,382,894.13 Plant
110,000,000.00
less: Accm. Depn 11,000,000.00
Net Plant
99,000,000.00
P/L

Depn
Direct cost
Interest Paid

11,000,000.00
5,500,000.00
4,882,894.13

Lessee Ltd.
Liability
Lease payable

Asset
86,212,378.30 Plant
110,000,000.00
less: Accm. Depn 22,000,000.00
Net Plant
88,000,000.00
P/L

Depn
Direct cost
Interest Paid

11,000,000.00
5,500,000.00
4,329,484.17

Lessee Ltd.
Liability
Lease payable

Asset
73,462,089.44 Plant
110,000,000.00
less: Accm. Depn 33,000,000.00
Net Plant
77,000,000.00
P/L

Depn
Direct cost
Interest Paid

11,000,000.00
5,500,000.00
3,749,711.14

Lessee Ltd.
Liability
Lease payable

Asset
60,104,408.60 Plant
110,000,000.00
less: Accm. Depn 44,000,000.00
Net Plant
66,000,000.00
P/L

Depn
Direct cost
Interest Paid

11,000,000.00
5,500,000.00
3,142,319.16

Repayment of lease

13,357,680.84

Lessee Ltd.
Liability
Lease payable

Asset
46,110,401.15 Plant
110,000,000.00
less: Accm. Depn 55,000,000.00
Net Plant
55,000,000.00
P/L

Depn
Direct cost
Interest Paid

11,000,000.00
5,500,000.00
2,505,992.55

Lessee Ltd.
Liability
Lease payable

Asset
31,449,754.07 Plant
110,000,000.00
less: Accm. Depn 66,000,000.00
Net Plant
44,000,000.00
P/L

Depn
Direct cost
Interest Paid

11,000,000.00
5,500,000.00
1,839,352.92

Lessee Ltd.
Liability
Lease payable

Asset
16,090,710.31 Plant
110,000,000.00
less: Accm. Depn 77,000,000.00
Net Plant
33,000,000.00
P/L

Depn

11,000,000.00

Direct cost
Interest Paid

5,500,000.00
1,140,956.24

Lessee Ltd.
Liability
Lease payable

Asset
0.00 Plant
110,000,000.00
less: Accm. Depn 88,000,000.00
Net Plant
22,000,000.00
P/L

Depn
Direct cost
Interest Paid

11,000,000.00
5,500,000.00
409,289.69

one and years one to eight

ar on the historical cost of asset.

ear on the historical cost of asset.
hod" with asset life = 10yrs
Monthly
Cashflow
0
-110000000
1 1,375,000.00
2
1375000
3
1375000
4
1375000
5
1375000
6
1375000
7
1375000
8
1375000
9
1375000
10
1375000
11
1375000
12
1375000
13
1375000
14
1375000
15
1375000
16
1375000
17
1375000
18
1375000
19
1375000
20
1375000
21
1375000
22
1375000
23
1375000
24
1375000
25
1375000
26
1375000
27
1375000
28
1375000

Interest
427423.3
423741.3
420045
416334.4
412609.3
408869.8
405115.7
401347.1
397563.8
393765.8
389953.1
386125.5
382283.1
378425.7
374553.3
370665.9
366763.4
362845.8
358912.9
354964.7
351001.2
347022.3
343027.9
339018
334992.5
330951.4
326894.6
322822

Principal repay
947576.7381
951258.7049
954954.9785
958665.6146
962390.669
966130.1977
969884.257
973652.9033
977436.1933
981234.1839
985046.9322
988874.4956
992716.9316
996574.2981
1000446.653
1004334.055
1008236.561
1012154.232
1016087.125
1020035.3
1023998.817
1027977.734
1031972.112
1035982.011
1040007.491
1044048.613
1048105.437
1052178.025

PrincipalBal
110000000
109052423.3
108101164.6
107146209.6
106187544
105225153.3
104259023.1
103289138.8
102315485.9
101338049.7
100356815.6
99371768.63
98382894.13
97390177.2
96393602.9
95393156.25
94388822.19
93380585.63
92368431.4
91352344.28
90332308.98
89308310.16
88280332.43
87248360.31
86212378.3
85172370.81
84128322.2
83080216.76
82028038.74

29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65

1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000

318733.6
314629.3
310509
306372.8
302220.4
298052
293867.3
289666.4
285449.1
281215.5
276965.4
272698.8
268415.7
264115.8
259799.3
255466
251115.9
246748.8
242364.8
237963.8
233545.7
229110.3
224657.8
220188
215700.7
211196.1
206673.9
202134.2
197576.9
193001.8
188408.9
183798.2
179169.6
174523
169858.4
165175.6
160474.6

1056266.437
1060370.736
1064490.983
1068627.239
1072779.568
1076948.031
1081132.691
1085333.612
1089550.856
1093784.486
1098034.567
1102301.163
1106584.337
1110884.154
1115200.679
1119533.977
1123884.112
1128251.15
1132635.157
1137036.199
1141454.342
1145889.652
1150342.197
1154812.042
1159299.256
1163803.906
1168326.059
1172865.784
1177423.149
1181998.222
1186591.072
1191201.769
1195830.381
1200476.979
1205141.631
1209824.409
1214525.383

80971772.3
79911401.56
78846910.58
77778283.34
76705503.77
75628555.74
74547423.05
73462089.44
72372538.58
71278754.10
70180719.53
69078418.37
67971834.03
66860949.88
65745749.20
64626215.22
63502331.11
62374079.96
61241444.80
60104408.60
58962954.26
57817064.61
56666722.41
55511910.37
54352611.11
53188807.21
52020481.15
50847615.36
49670192.21
48488193.99
47301602.92
46110401.15
44914570.77
43714093.79
42508952.16
41299127.75
40084602.37

66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96

1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000
1375000

155755.4
151017.8
146261.8
141487.3
136694.3
131882.7
127052.3
122203.2
117335.3
112448.4
107542.6
102617.7
97673.6
92710.34
87727.79
82725.88
77704.53
72663.68
67603.23
62523.13
57423.28
52303.62
47164.06
42004.53
36824.96
31625.26
26405.35
21165.16
15904.61
10623.62
5322.111

1219244.623
1223982.2
1228738.186
1233512.652
1238305.671
1243117.313
1247947.652
1252796.759
1257664.709
1262551.574
1267457.428
1272382.344
1277326.397
1282289.661
1287272.21
1292274.12
1297295.466
1302336.323
1307396.767
1312476.874
1317576.721
1322696.384
1327835.94
1332995.467
1338175.042
1343374.743
1348594.649
1353834.837
1359095.387
1364376.378
1369677.889

38865357.74
37641375.54
36412637.36
35179124.70
33940819.03
32697701.72
31449754.07
30196957.31
28939292.60
27676741.03
26409283.60
25136901.25
23859574.86
22577285.20
21290012.99
19997738.87
18700443.40
17398107.08
16090710.31
14778233.44
13460656.72
12137960.33
10810124.39
9477128.93
8138953.88
6795579.14
5446984.49
4093149.65
2734054.27
1369677.89
0.00

Seller Ltd had a plant with carrying value of Rs yyy crores. This was sold to Leasing Ltd for Rs 1.5yyy
and leased back for a tenor of 3 years, the lease rent being Rs 0.06yyy crores per month. Assuming

The plant has been sold at a price above its carrying value. The gains made on such a sale has to

Plant cost
Sold to Leasing ltd
Lease rent
Tenor
Implicit return

110,000,000.00
165,000,000.00
6,600,000.00 per month
3 years
2.121%
(When plant is purchased)

Liability

Leasing ltd.
Asset

Liability

Plant

16.5 cr

(the gains will realised ove

P&L Leasing Ltd.
NO entry

No entry
When plant is leased out

Liability

Leasing ltd.
Asset
Lease receivable

Liability
16.5 cr

Lease payable

P&L Leasing Ltd.

No entry

no entry

After 1 year

Liability

Leasing ltd.
Asset
Cash
Lease receivable

Liability
79,200,000.00
123,136,023.93

Lease payable

P&L Leasing Ltd.

Interest Income

37,336,023.93

Depn
Gain on selling
Interest Paid

After 2 year
Liability

Leasing ltd.
Asset
Cash
Lease receivable

79,200,000.00
69,280,902.90

Liability
Lease payable

P&L Leasing Ltd.

Interest Income

25,344,878.97

Depn
Gain on selling
Interest Paid

After 3 year
Liability

Leasing ltd.
Asset
Cash
79,200,000.00
Lease recv. Removed

Liability
Lease Payable removed fro
Liabilities

P&L Leasing Ltd.

Interest Income

9,919,097.10

Depn

Gain on selling
Interest Paid

asing Ltd for Rs 1.5yyy crores

is a finance lease Show extracts from the two companies P&L and Balance Sheet for day one and

on such a sale has to be capitalised over the period of lease that is over 3 years.

Assuming life of plant to be 3 years

Using S.L. depn
Depn each year
55,000,000.00

purchased)
Seller Ltd.
Asset
Remove Plant from asset

gains will realised over the period of lease that is 3years)

P&L Seller Ltd.
0

Seller Ltd.
Asset
16.5 cr

Plant

16.5 cr

P&L Seller Ltd.

0

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

Seller Ltd.
Asset
Plant
123,136,023.93 Depn
Net Plant

165,000,000.00
55,000,000.00
110,000,000.00

P&L Seller Ltd.

55,000,000.00
18,333,333.33
37,336,023.93

Seller Ltd.
Asset
69,280,902.90 Plant
165,000,000.00
less: Accm. Depn 110,000,000.00
Net Plant
55,000,000.00
P&L Seller Ltd.
55,000,000.00
18,333,333.33
25,344,878.97

Seller Ltd.
Asset
e Payable removed from the Asset is removed since it has depreciated

P&L Seller Ltd.

55,000,000.00

24
25
26
27
28
29
30
31
32
33
34
35
36

18,333,333.33
9,919,097.10

ance Sheet for day one and years one to three

Monthly
Cashflow
-165000000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000

Interest
3499838
3434080
3366928
3298350
3228319
3156802
3083767
3009184
2933019
2855238
2775807
2694692
2611856
2527263
2440875
2352655
2262564
2170562
2076609
1980663
1882681
1782622
1680439

Principal repay
PrincipalBal
165000000
3100162 161899838.4
3165920 158733918.8
3233072 155500846.4
3301650 152199196.9
3371681 148827515.6
3443198 145384317.1
3516233 141868084.4
3590816 138277268.5
3666981 134610287.2
3744762 130865525.1
3824193 127041332.2
3905308 123136023.9
3988144 119147879.6
4072737 115075142.1
4159125 110916017.3
4247345 106668672.6
4337436 102331236.9
4429438 97901799.29
4523391 93378408.22
4619337 88759070.86
4717319 84041752.08
4817378 79224373.59
4919561 74304812.99

6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000
6600000

1576090
1469527
1360704
1249572
1136084
1020188
901833.6
780969
657540.7
531494.4
402774.5
271324.2
137085.8

5023910
5130473
5239296
5350428
5463916
5579812
5698166
5819031
5942459
6068506
6197226
6328676
6462914

69280902.9
64150429.95
58911133.8
53560706.2
48096789.93
42516977.75
36818811.39
30999780.41
25057321.14
18988815.53
12791589.98
6462914.211
0.00

4 If the lease in question 3 above had been an operating lease

Show extracts from the two companies P&L and Balance Sheet for day one and years on
Plant cost
Sold to Leasing ltd
Lease rent
Tenor

110,000,000.00
165,000,000.00
6,600,000.00 per month
3 years

The plant has been sold at a price above its carrying value. The gains made on such a sale has to
(When plant is purchased)
Leasing ltd.
Liability
Asset
Liability
Plant

16.5 cr
(the gains will realised

P&L Leasing Ltd.

Gain on selling of plant
When plant is leased out
Liability

Leasing ltd.
Asset
Plant

Liability
No change
16.5 cr

P&L Leasing Ltd.

NO entry
no entry

After 1 year
Liability

Leasing ltd.
Asset
Plant
Depn

Liability
165,000,000.00
55,000,000.00

Net Plant

110,000,000.00

P&L Leasing Ltd.

Rent Received
Depn

79,200,000.00
55,000,000.00

Rent Paid
Gain on selling

After 2 year
Liability

Leasing ltd.
Asset
Plant
Depn
Net Plant

Liability
165,000,000.00
110,000,000.00
55,000,000.00

P&L Leasing Ltd.

Rent Received
Depn

79,200,000.00
55,000,000.00

Rent Paid
Gain on selling

After 3 year
Liability

Leasing ltd.
Asset
Plant
Depn
Net Plant

Liability
165,000,000.00
165,000,000.00
-

P&L Leasing Ltd.

Rent Received
Depn

79,200,000.00
55,000,000.00

Rent Paid
Gain on selling

r day one and years one to three

Assuming life of plant to be 3 years
Using S.L. depn
Depn each year
###########

on such a sale has to be capitalised over the period of lease that is over 3 years.
t is purchased)
Seller Ltd.
Asset
Remove Plant from asset

the gains will realised over the period of lease that is 3years)
P&L Seller Ltd.

ain on selling of plant

is leased out

o change

Seller Ltd.
Asset
No change

P&L Seller Ltd.

0

Seller Ltd.
Asset
Cash reduces by

79,200,000.00

P&L Seller Ltd.

ain on selling

79,200,000.00
18,333,333.33

Seller Ltd.
Asset
Cash reduces by

79,200,000.00

P&L Seller Ltd.

ain on selling

79,200,000.00
18,333,333.33

Seller Ltd.
Asset
Cash reduces by

P&L Seller Ltd.

ain on selling

79,200,000.00
18,333,333.33

79,200,000.00

Importer Ltd bought machinery costing USD zzz million on Jan 5, 2013 from a German vendor
This was paid on May 6, 2013 The machine was installed on Feb 15, 2013
Show extracts from the two companies P&L and Balance Sheet for day one and years one to three
Depreciation was charged at 6% straight lineAssume functional currency of the German company to
Currency Rates
54.89
54.355
53.362

5-Jan-13 USD/INR
31-Mar-13 USD/INR
6-May-13 USD/INR

EUR/USD
EUR/USD
EUR/USD

1.31125
1.28163
1.30347

Books of German Co.

Value of Asset
5-Jan-13 Debtors

11 USD million
Dr

14.42375

To Sales

14.42375

31-Mar-13 Forex Fluctuation

Dr
To Debtors

0.32582
0.32582

Debtors as on 31 Mar 13

14.09793

P&L Sales
P&L Forex Loss

6-May-13 Bank

14.42375
0.32582

Dr

14.33817

To Debtors
To Forex Gain

14.09793
0.24024

Importer Company ( Balnace Sheet and P&L)

Year 1
5-Jan-13 Machinery

Dr

603.79

To Vendor Payable

603.79

31-Mar-13 Depreciation
Dr
4.528425
To Accumulated Depreciation
31-Mar-13 Vendor Payable
Dr
To Forex Fluctuation

4.528425

5.885
5.885

Balance Sheet Extracts

Machinery Account

P&L Ex
603.79

Accumulated Depreciation
Net Block
Vendor Payable Liability

Depreciation

4.528425
599.26158

Forex Gain

597.905

Year 2
6-May-13 Vendor Payable
Dr
To Bank
To Forex Gain

597.905
586.982
10.923

Balance Sheet Year 2

Machinery Account
Accumulated Depreciation
Net Block
Vendor Payable Liability

Year 3

603.79
40.755825
563.03418
0 Paid off

Depreciation
Forex Gain

Balance Sheet
Machinery Account
Accumulated Depreciation
Net Block
Vendor Payable Liability

603.79
76.983225
526.80678
0 Paid off

Depreciation
Forex Gain

German vendor

d years one to three

German company to be EUR

P&L Extracts

epreciation

epreciation

4.528425
5.885

P&L Extracts
36.2274
10.923

epreciation

P&L
36.2274
0

If the above payment was funded by a USD loan of equivalent amount from SBI, and this loan
Show extracts from Importer Ltd P&L and Balance Sheet for all relevant dates upto June 30, 2013
Assume USD INR on June 30, 2013 to be Rs 61.05
Other dates get data from www.oa
Currency Table
5-Jan-13 USD/INR

54.89

EUR/USD

1.31125

31-Mar-13 USD/INR

54.355

EUR/USD

1.28163

6-May-13 USD/INR

53.362

EUR/USD

1.30347

41431 USD/INR

60.464

30-Jun-13 USD/INR

61.5

Amortisation Schedule
Principal remaining
Principal Payment Interest
6-May-13

11

6-Jun-13

11

30-Jun-13

10.89

0.11

Total Installment
Closing Principal

0.045833333 0.15583333

10.89

0.03580274

Books of Importer Ltd ( Indian Co.)

6-May-13 Bank

Dr

586.982

To Loan
6-May-13 Vendor Payable

586.982
Dr

250.033

To Bank

245.4652

To Forex Gain
6-Jun-13 Forex Loss

4.5678
Dr

0.78122

To Loan
6-Jun-13 Loan
Interest

0.78122
Dr

6.65104

Dr

2.77126667

To Bank
30-Jun-13 Forex Loss

9.42230667
Dr

To Loan

88.62282
88.62282

30-Jun-13 Interest

Dr
To Accrued Interest Dr

2.20186849
2.20186849

SBI, and this loan

was to be repaid in 100 monthly instalments and carried an interest of 5%
s upto June 30, 2013
get data from www.oanda.com

Balance Sheet as on 30-Jun-13

Machinery Account
Add:Forex Loss

252.494
84.83624

Accumulated Depreciation

41.2873536

Net Block

296.042886

Loan Payable

669.735

Accrued Interest

2.20186849
P&L Extracts

Depreciation
Interest

5.0599536
2.20186849

669.735

Exporter Ltd sold product for USD aaa million on Oct 31,It2012
received 25% on Dec 5, 2012; another 50% on Jan 15, 2013
Show extracts from Exporter Ltd P&L and Balance Sheet for all relevant dates upto June 30, 2013
Assume USD INR on June 30, 2013 to be Rs 61.05

Other dates get data from www.oanda.com

Currency Table
31-Oct-12 USD/INR

53.9689

5-Dec-12 USD/INR

54.6348

15-Jan-13 USD/INR

54.5658

31-Mar-13 USD/INR

54.355

30-Jun-13 USD/INR

61.05

Sales

11 USD Million

31-Oct-12 Debtors

Dr

593.6579

To Sales

5-Dec-12 Bank

593.6579

Dr

150.2457

To Debtors

148.414475

To Forex Gain
15-Jan-13 Bank

1.831225
Dr

300.1119

To Debtors

296.82895

To Forex Gain
31-Mar-13 Debtors

3.28295
Dr

1.061775

To Forex Gain

1.061775
3/31/2013

Balance sheet
Liability

ASSET
Debtors

149.47625
P&L Statement

Sales

On 31 Oct

593.6579

On 31 Mar

Forex Gain

6.17595
Calculation

30-Jun-13 Debtors

(entry)
Dr

To Forex Gain

18.41125

On 31 Mar
18.41125

On 30 Jun

% on Jan 15, 2013

148.414475
149.47625

6/30/2013

ASSET

Balance sheet
Liability

Debtors

167.8875
P&L statement

Sales

Forex Gain

149.47625
167.8875

18.41125