Answered: When a company sells an asset and…

When a company sells an asset and simultaneously leases it back, what criteria must be met to apply saleleaseback accounting rather than accounting for the transaction as a loan ?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 9GI

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When assets are purchased under an installment sales contract, the seller becomes the creditor. True or False?
In a sale and leaseback transaction, which of the following statements is most incorrect? A. The seller-lessee records a rent expense. B. The buyer-lessor recognizes an gain. C. The seller-lessee derecognizes an asset. D. The buyer lessor recognizes an income.
When should a transfer of receivables be recorded as a sale? A) The buyer surrenders controlof the receivables to the seller. B) The transferor maintains effective control over the transferred assets through an agreement to repurchase or redeeem them prior to their maturity. C) The transferee cannot pledge or exchange the transferred assets. D) The transferred asstes are isolated from the transferor.
What are the reporting issues in a sale with a repurchase agreement?
Metheny Corporation's lease arrangements qualify as sales-type leases at the time of entering into the transactions. How should the corporation recognize sales revenue and cost of goods sold in these situations?
receivables not measured initially at their transaction price are measured initially ata. fair value plus transaction costs that are directly attributable to the acquisition of the financial assetb. fair valuec. fair value minus transaction costs that are directly attributable to the acquisition of the financial assetd. fair value less costs to sell
Which of the following is an example of faithful representation? A Showing lease payments as a rental expense B Being prudent by recording the entire amount of a convertible loan as a liability C Creating a provision for staff relocation costs as part of a planned restructuring D Recording a sale and repurchase transaction with a bank as a loan rather than a sale
When do companies break apart a sale and treat its parts differently for purposes of recognizing revenue?
Which of the following is correct about subsequent measurement of financial asset at fair value? a. the financial asset shall be measured at fair value if the business model is not to collect contractual cash flows on specified dates and the contractual cash flow ae not solely payment of principal and interest. b. An entity may designate a finacncial asset as measured at fair value through profit or loss even if the financial asset satisfies the amortized cost measurement. c. both are correct d. both are incorrect
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Examples of when an entity has retained substantially all the risks and rewards of ownership of transferred financial asset include A. All of these. B.A sale and repurchase transaction where the repurchase price is a fixed price or the sale price plus a lender's return. C.A sale of a financial asset together with a total return swap that transfers the market risk exposure back to the entity. D.A sale of short-term receivables in which the entity guarantees to compensate the transferee for credit losses that are likely to occur.