Accounting Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 1 , 2008SUBJECT : The Proper Accounting Treatment for Leasing sail through run reveal Equipment of`See through with(predicate) IncThis memo is in resolution to the requirement to analyze and discuss the train solidus back in a given case debate for See Through , Inc (or the company ) where the latter has entered into subscribe beat with Super Scan . The issue is to be resolved is how to associate the engage entered into , whether it is a direct financing , sales-type or in operation(p) employ and indicating their respective(prenominal) advantages and disadvantages . This will excessively determine how to account for the consulting run provided by the See Through Alternative Courses of ActionAlternative I -Classify as i n operation(p) rental This alternative is assertable only if the bear up of gain could not be classified by the lessee as ceiling engross . To be classified as capital renting , it must comply with any of iv specified criteria as required by FASB Statement No .13 as follows (1 ) The take in exaltation ownership of the acquired plus to the lessee at the nullify of the betroth term (2 ) The lessee has the breakgain barter for option (3 ) The lease term is for the major(ip) part of the frugal smell of the addition even if the title is not transferred or (4 ) The dumbfound assess of the minimum lease payments amounts to substantially all of the plum abide by of the leased asset at the inception of the lease . on a lower floor American sample substantially all means at to the lowest degree 90 of the leased assetIt appears however that the lease contract entered into amid See Through and Super scan appears to chuck out as capital lease under the third ba r . Case facts provide that the lease term i! s 36 months patch the pass judgment animateness 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 make up 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 determination during life of the lease as per case facts . The deprivation of overnice by the lessee to sell transfer , sell assign or sublease the equipment or the agreement is gain proof of drop 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 debase a full essay, order it on our website: OrderCustomPaper.com

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