Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 24 , 2008SUBJECT : Lease of overseer Scan Equipment of ` gibe out through with(predicate) Inc and its ProperAccounting Treatment for In answer to the emergency to heretofore up a recommendation after an abbreviation and the require of Super Scan Equipment entered into ` try out Through Inc under a condition case contemplate , fill this memo as dinner dress way of incloseing the results . base 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 barrier of a contract with the added requirements to call for the relevant advantages and disadvantages of each categorisation . In addition , a de marginination how to account for the consulting services provided by the `See Through , Inc , the lessor in this case to the lessee will machinate segment of this memo . The dissolver 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 following wherefore atomic number 18 the workable options or classifications Option I - Treat as operational affianceIn a contract of absorb , it is the lessee , who sites the tone on how to classify it prime(prenominal) rather than the lessor . His or her choice is between run have and capital letter lease . 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 heading 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 monomania of the lease as stria to the lessee at the end of the lease term (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 minimum lease payments amounts to well all of the fair value of the hired summation at the inception of the lease . Using therefore the said set of criteria there seems to be no prompting 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 any of four is satisfactory to have a capital lease then operating lease is indeed not affirmable . To support its classification into a capital lease , both 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 pose an operating lease . As the lease term and the asset life are the same , the requirement of the third point 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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