Capitalizing certain long-term leases

Assignment Help Accounting Basics

Reference no: EM13132273

On january 1,2008 Von company entered into two non cancelable leases for new machines to be used in its manufacturing operations. The first lease does not contain a bargain purchase option: the lease term is equal to 80 percent of the estimated economic life of the machine. The second lease contains a bargain purchase option: the lease term is equal to 50 percent of the estimated economic life of the machine.

Required:

a. What is the theoretical basis for requiring lessees to capitalize certain long-term leases? Do not discuss the specific criteria for classifying a lease as a capital lease.

b. How should a lessee account for a capital lease an its inception?

c. How should a lessee record each minimum lesase payment for a capital lease?

d. How should Von classify each of the two leases? Why?

Reference no: EM13132273

Questions Cloud

Find the concentration of calcium ions : find the concentration of calcium ions in a solution made by adding 3.50 g of calcium fluoride to 750ml of .125M NaF. Ksp for CaF2 is 3.95x10^-11

Suggest a chemical test that would allow you to distinguish : Suggest a chemical test that would allow you to distinguish between tert-butyl alcohol and 1 butanol, both of which give a positive ceric nitrate test?

What causes cycloalkanes to have two less hydrogen atoms : What causes cycloalkanes to have two less hydrogen atoms than similar alkanes that are open chain ones? i) What is the three dimensional structure of methane? Why?

What is the specific heat of the nickel : 100.0 g of nickel at 150 °C was placed in 1.00 L of water at 25.0 °C. The final temperature of the nickel-water mixture was 26.3 °C.

Capitalizing certain long-term leases : What is the theoretical basis for requiring lessees to capitalize certain long-term leases? Do not discuss the specific criteria for classifying a lease as a capital lease.

Explain why alcohols such as ethanol is soluble in water : Explain why alcohols such as ethanol and propanol are soluble in water, butanol is moderately soluble and pentanol is slightly soluble

Obama care : Write an example essay for the same topic (Obama care)

Ending inventory by the gross profit method : If it began the quarter with an $18,000 inventory at cost and purchased $72,000 of merchandise during the quarter, its estimated ending inventory by the gross profit method is:

User Account

All Pages