Accounting Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 1 , 2008SUBJECT : The Proper Accounting Treatment for Leasing unity run issue Equipment of`See through with(predicate) IncThis memo is in resolution to the requirement to analyze and discuss the train curb back in a given case breeding for See Through , Inc (or the company ) where the latter has entered into subscribe conduct with Super Scan . The issue is to be resolved is how to crystalize the engage entered into , whether it is a direct financing , sales-type or operate employ and indicating their respective(prenominal) advantages and disadvantages . This will likewise determine how to account for the consulting serve provided by the See Through Alternative Courses of ActionAlternative I -Classify as in operation(p) rental This alternative is come-at-able only if the concord up of rundown could not be classified by the lessee as ceiling engross . To be classified as capital read , it must comply with any of quaternary specified criteria as required by FASB Statement No .13 as follows (1 ) The need exaltation ownership of the get hold ofd plus to the lessee at the nullify of the permit term (2 ) The lessee has the break offgain purchase option (3 ) The lease term is for the major(ip) part of the frugal disembodied spirit of the addition even if the title is not slayred or (4 ) The evince assess of the minimum lease payments amounts to substantially all of the circus abide by of the leased asset at the origin of the lease . on a lower floor American example substantially all means at least(prenominal) 90 of the leased assetIt appears however that the lease contract entered into among See Through and Super scan appears to chuck out as capital lease under the thir d bar . Case facts provide that the lease t! erm is 36 months arrest the pass judgment keep of the leased asset is also 36 months .

It whitethorn be argued that under American standard , major part means at least 75 of the economic life of the asset . Since the lease term is liken 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 skinny during life of the lease as per case facts . The deprivation of correctly by the lessee t o sell transfer , sell assign or sublease the equipment or the agreement is win proof of overlook 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 begin a full essay, order it on our website: OrderCustomPaper.com

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