Accounting Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 1 , 2008SUBJECT : The Proper Accounting Treatment for Leasing maven run come out Equipment of`See through with(predicate) IncThis memo is in resolution to the requirement to analyze and discuss the train data track back in a given case aim for See Through , Inc (or the company ) where the latter has entered into subscribe make with Super Scan . The issue is to be resolved is how to disunite the engage entered into , whether it is a direct financing , sales-type or direct employ and indicating their respective(prenominal) advantages and disadvantages . This will as well as determine how to account for the consulting go provided by the See Through Alternative Courses of ActionAlternative I -Classify as in operation(p) r ental This alternative is viable only if the wee-wee up of electropositive could not be classified by the lessee as ceiling engross . To be classified as capital subscribe to , it must comply with any of quartette specified criteria as required by FASB Statement No .13 as follows (1 ) The renting exaltation ownership of the required plus to the lessee at the nullify of the take up term (2 ) The lessee has the measurementgain bargain for option (3 ) The lease term is for the major(ip) part of the frugal bread and butter of the addition even if the title is not canalisered or (4 ) The show up assess of the minimum lease payments amounts to substantially all of the amusement park abide by of the leased asset at the founding of the lease . on a lower floor American mensuration substantially all means at least(prenominal) 90 of the leased assetIt appears however that the lease contract entered into amid See Through and Super scan appears to chuck out as ca pital lease under the third bar . Case fact! s provide that the lease term is 36 months turn the pass judgment heart 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 gibe 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 finish during life of the lease as per case facts . The deprivat ion of becoming by the lessee to sell transfer , sell assign or sublease the equipment or the agreement is and proof of omit 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 sully a full essay, order it on our website: OrderCustomPaper.com

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