Question
Asked Jan 25, 2020
775 views

Identify the lease classifications for lessors and the criteria that must be met for each classification. What is the relevance of revenue recognition criteria for lessor accounting for leases?

check_circle

Expert Answer

Step 1

Lease: A contractual agreement for an asset between two parties. The parties involved are lessee and lessor. Lessor in lease is the owner of leased asset and lessee is a tenant who takes the asset on lease for a lease payment per period.

Step 2

Lease classifications for lessor:

 

Lease are classified as - Finance lease

- Operating lease

 

Standard conditions for leases:

 

- Transfer of ownership of lease property to the lessee.

- Lease term should be equal to 75% or more for estimated economic life of leased asset.

- Present value of lease payments should equal or more than 90% of fair value of lease property

- Lease agreement containing a bargain purchase option.

 

A lease should satisfy certain conditions for qualifying to be a finance lease. If a lease satisfies any three of the above conditions. Then such lease is classified as finance lease. If a lease...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Other

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Gingrich Importers provides the following pension plan information. Fair value of pension plan as...

A: Pension plan: Pension plan is the plan devised by corporations to pay the employees an income after ...

question_answer

Q: On January 1, 2016, the Excel Delivery Company purchased a delivery van for $33,000. At the end of i...

A: 1. 

question_answer

Q: Use the information for Escapee Company from BE21.20. Assume the same facts, except Escapee guarante...

A: Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of...

question_answer

Q: 1. Locate Revenue Ruling 1979-162 and answer the following questions   a. What is its Cumulative Bul...

A: The revenue rule 1979-162  (1979-1 CB 116), the Internal Revenue Service held that any expenses incu...

question_answer

Q: Costco has a policy of not hiring business school graduates because it wants employees to start at t...

A: Business sBusiness schoolBusiness school graduates are usually students who have completed their Mas...

question_answer

Q: Describe the accounting treatment for a change in inventory method other than to LIFO.

A: Method of Inventory: Inventory refers to the current assets that a company expects to sell during th...

question_answer

Q: Discuss the factors that influence the estimation of service life for a depreciable asset.

A: Fixed asset:It refers to the long-term assets having a useful life of more than a year which is, acq...

question_answer

Q: Belltone Company made the following expenditures related to its 10-year-old manufacturing facility: ...

A: Subsequent expenditure: Expenditures made over the life of the assets to maintain and/or improve the...

question_answer

Q: Jelly Co. processes jam and sells it to the public. Jelly leases equipment used in its production pr...

A: Meaning: