Communication Case 15–5
Where’s the gain?
Appendix
General Tools is seeking ways to maintain and improve cash balances. As company controller, you have proposed the sale and leaseback of much of the company’s equipment. As seller-lessee, General Tools would retain the right to essentially all of the remaining use of the equipment. The term of the lease would be six years.
You previously convinced your CFO of the
Required:
Write a memo to your CFO. Include discussion of each of these points:
1. How the transaction should be accounted for.
2. Why General Tools will not get the gain the CFO had counted on.
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Intermediate Accounting, 10 Ed
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