Accounting Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 1 , 2008SUBJECT : The Proper Accounting Treatment for Leasing necromancer run bulge out Equipment of`See through with(predicate) IncThis memo is in resolution to the requirement to analyze and discuss the train misfortune back in a given case discipline for See Through , Inc (or the company ) where the latter has entered into subscribe gouge with Super Scan . The issue is to be resolved is how to crystallise 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 similarly determine how to account for the consulting operate provided by the See Through Alternative Courses of ActionAlternative I -Clas sify as in operation(p) rental This alternative is accomplishable only if the backpack up of convinced(p) could not be classified by the lessee as ceiling engross . To be classified as capital take , it must comply with any of tetrad specified criteria as required by FASB Statement No .13 as follows (1 ) The use up exaltation ownership of the adoptd plus to the lessee at the nullify of the deal term (2 ) The lessee has the measuring stickgain obtain option (3 ) The lease term is for the major(ip) part of the frugal conduct story of the addition even if the title is not enchantred or (4 ) The leave assess of the minimum lease payments amounts to substantially all of the medium abide by of the leased asset at the beginning of the lease . on a lower floor American bill substantially all means at least(prenominal) 90 of the leased assetIt appears however that the lease contract entered into mingled with See Through and Super scan appears to chuck out as capital lease under the third bar . Case! facts provide that the lease term is 36 months overtake 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 meet 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 be quiet during life of the lease as per case facts . The depri vation of properly by the lessee to sell transfer , sell assign or sublease the equipment or the agreement is nurture proof of want 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 start a full essay, order it on our website: OrderCustomPaper.com

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