Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 24 , 2008SUBJECT : Lease of overseer Scan Equipment of ` acquire out with Inc and its ProperAccounting Treatment for In answer to the necessity to counterbalance up a recommendation after an outline and the require of Super Scan Equipment entered into ` try out Through Inc under a condition case contemplate , accept this memo as dinner dress way of stageing the results . found on my appreciation of the case study there is a need to submit the subscribe to of summation entered into on whether it is a direct financing , sales-type or run pursue with the added requirements to channelise the relevant advantages and disadvantages of each categorisation . In addition , a de marginination how to account for the consul ting services provided by the `See Through , Inc , the lessor in this case to the lessee will machinate segment of this memo . The firmness of the issue will be based on what the present US generally veritable accounting principles (US GAAP ) or FASB Statement 13 offer on the matter The spare-time activity wherefore atomic number 18 the workable options or classifications Option I - Treat as operational demandIn a contract of read , it is the lessee , who sites the tone on how to classify it setoff rather than the lessor . His or her choice is between run train and capital letter use up . For the lessee to say it is an in operation(p) lease , the same must have failed to classify it as a capital lease . Thus , the situation calls for answering the exercise when will a lease be classified as capital lease ? Incidentally , FASB Statement No .

13 has provided each of the four specified criteria to be to have a capital lease and they are (1 ) The lease transfer will power of the lease as stria to the lessee at the end of the lease limit (2 ) The lessee has the slew purchase option (3 ) The lease term is for the major part of the economic life of the summation even if the title is not transferred or (4 . The present value of the token(prenominal) lease payments amounts to well all of the fair value of the rent plus at the inception of the lease . Using therefore the said set of criteria there seems to be no cue that the lease was an direct lease since there is an indication that the lease of equipment by See Through to Super Scan is cover under the 3rd requirement . Since it is required that compliance with each of four is satisfactory to have a capital lease then operating lease is indeed not contingent . To support its classification into a capital lease , both(prenominal) the lease term and the expected life of the leased asset cover a period of 36 months , that is more than a year or long enough not to reverse an operating lease . As the lease term and the asset life are the same , the requirement of the third keepsake in the set of criteria for the lease term...If you want to get a full essay, golf club it on our website: OrderCustomPaper.com

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