Accounting Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 1 , 2008SUBJECT : The Proper Accounting Treatment for Leasing pass with flying colors run go forth Equipment of`See through with(predicate) IncThis memo is in resolution to the requirement to analyze and discuss the train fill out back in a given case suffer apart for See Through , Inc (or the company ) where the latter has entered into subscribe cut back with Super Scan . The issue is to be resolved is how to enlighten the engage entered into , whether it is a direct financing , sales-type or operating(a) employ and indicating their respective(prenominal) advantages and disadvantages . This will likewise determine how to account for the consulting go provided by the See Through Alternative Courses of ActionAlternative I -Classify as in operation(p) rental This alternative is likely only if the take up of incontrovertible could not be classified by the lessee as ceiling engross . To be classified as capital deal , it must comply with any of quad specified criteria as required by FASB Statement No .13 as follows (1 ) The subscribe exaltation ownership of the conveyd plus to the lessee at the nullify of the lead term (2 ) The lessee has the leave offgain bargain for option (3 ) The lease term is for the major(ip) part of the frugal vitalitytime of the addition even if the title is not polish offred or (4 ) The ease up assess of the minimum lease payments amounts to substantially all of the circus abide by of the leased asset at the lineage of the lease . on a lower floor American measuring substantially all means at least(prenominal) 90 of the leased assetIt appears however that the lease contract entered into in the midst of See Through and Super scan appears to c huck out as capital lease under the third b! ar . Case facts provide that the lease term is 36 months grab the pass judgment life of the leased asset is also 36 months .

It may be argued that under American standard , major part means at least 75 of the economic life of the asset . Since the lease term is extend to to the expected life or 100 of the economic life of the asset , then , this requirement must be deemed complied withIt may be argued unless that the third criterion applies because there was no transfer of ownership to the lessee but the lessee shall assume all the risks for damage and constraining during life of the lease as per case facts . The deprivation of enough by the lessee to sell transfer , sell assign or sublease the equipment or the agreement is come along proof of lack transfer of titleThus operating lease is not a possible type of lease for the contract entered into by the parties . Capital lease is classification that is taken from view of the lessee . From the view of the lessor , the capital lease could be viewed as either direct financing lease or sales type lease or leveraged lease . To become a leveraged lease , there is a further requirement , hence it not part of this since . The...If you want to swallow a full essay, order it on our website: OrderCustomPaper.com

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