BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
6 views

Use the following information to decide whether this equipment lease qualifies as an operating, sales-type, or direct financing lease to a lessor.

  1. a. •    There is no transfer of ownership at the end of the lease term.
    • There is no bargain purchase option.
    • The lease term is 60% of the economic life of the leased property.
    • The present value of lease payments, including a residual value guaranteed by the lessee, is 100% of the fair value of the leased property to the lessor.
    • The collectability of the lease payments is reasonably assured.
    • The leased asset was not of a specialized nature.
  2. b. Same as (a), except that the residual value is guaranteed by a third party, not the lessee. The present value of the residual value guarantee is 15% of the fair value of the leased property.
    1. c. Same as (a), except that:
      • the present value of the lease payments, including a residual value guaranteed by the lessee, is only 50% of the fair value of the leased asset.
      • The collectability of the minimum lease payments is not predictable.

a.

To determine

Identify whether the given lease qualifies as an operating lease, sales-type lease, or direct financing lease to lessor.

Explanation

Lease: Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Identify whether the given lease qualifies as a direct financing lease sale-type lease or operating lease:

Criteria for classificationWhether criteria met or notRemarks
1. Transfer of ownership at the end of lease to lesseeNO 
2. Contains a purchase option NO 
3...

b.

To determine

Identify whether the given lease qualifies as an operating lease, sales-type lease, or direct financing lease to lessor.

c.

To determine

Identify whether the given lease qualifies as an operating lease, sales-type lease, or direct financing lease to lessor.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is billing (or vendor) fraud?

Accounting Information Systems

Why is productivity important?

Principles of Microeconomics (MindTap Course List)

Describe the major approaches used in target market selection.

Foundations of Business (MindTap Course List)

LOAN AMORTIZATION Jan sold her house on December 31 and took a 10,000 mortgage as part of the payment. The 10-y...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What factors distinguish DSS from EIS?

Pkg Acc Infor Systems MS VISIO CD