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CA Inter Advanced Accounting Test Answers: AS 19 Leases and AS 16 Borrowing Costs
- Shared by
- Kavyansh
- Course
- CA Inter
- Subject
- Advanced Accounting
- Added
- 5 Nov 2026
Part of: CA InterAdv Accounting
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This is a set of worked answers to a CA Inter Advanced Accounting chapter test covering AS 19 Leases and AS 16 Borrowing Costs. It walks through a lessee's recognition of a machine taken on finance lease, with the present value of minimum lease payments and a year-wise finance charge schedule, then a borrowing cost capitalisation problem using a weighted average rate, and a short advisory question on classifying a lease as operating. It suits students revising these two standards for the CA Inter exam who want to check each step of their own working against a model answer.
What the answers cover
The first question shows how a lessee measures a finance lease at the lower of fair value and the present value of minimum lease payments, including the guaranteed residual value. The schedule splits each annual payment into finance charge and reduction in outstanding liability. The second question computes specific and non-specific borrowing costs for a building under construction, with average accumulated expenditure worked out month by month and a journal entry for the capitalised amount. The third question explains why a three-year lease of a machine with a fourteen-year effective life is treated as an operating lease, with rentals charged to the statement of profit and loss.
How to use these for revision
Attempt the test under timed conditions first, using the 15-minute reading and 40-minute solving time stated on the paper. Then compare your present value factors, your finance charge arithmetic and your weighted average interest rate line by line with the answer. The working notes are where most marks are gained or lost, so check the average accumulated expenditure and the non-specific borrowing base closely. Use the operating versus finance lease reasoning in question three as a template for any classification question.
Who should read it
This is useful for CA Inter students preparing Advanced Accounting, particularly those working through the AS 19 and AS 16 chapters and attempting chapter-wise tests. It is also helpful for students who have understood the theory but find the numerical presentation of lease schedules and capitalisation workings difficult to follow.
Key topics in these notes
- Finance lease recognition at lower of fair value and PV of minimum lease payments
- Guaranteed and unguaranteed residual value in lessee accounts
- Finance charge and outstanding liability schedule
- Specific and non-specific borrowings under AS 16
- Weighted average rate of interest for capitalisation
- Average accumulated expenditure computation
- Operating lease classification and straight-line expense recognition
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Frequently asked questions
How is the lessee's value of a finance lease machine decided under AS 19?
The lessee records the asset at the fair value at inception, or at the present value of minimum lease payments if that is lower. The answer shows the lower figure being used with the working note.
How is the weighted average rate of interest calculated for borrowing costs?
Interest on the non-specific loans is totalled and divided by the total loan amount, giving the rate applied to the average accumulated expenditure in excess of the specific loan.
When is a lease treated as an operating lease in this question?
The answer says the lease term is short compared with the machine's effective life, so the arrangement is treated as an operating lease with rentals expensed on a straight-line basis.
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