Discuss reasons why jordan would want to treat the leases

Assignment Help Financial Accounting

Reference no: EM13138362

Jordan Industries manufactures and leases to its customers five-ton construction dump trucks. The lease arrangements are usually as follows:

Payments on the lease are due for five years after its inception, but the present value is not greater than 90% of the fair value of the trucks at the time of the sale.

The trucks revert to Jordan at the end of the lease. Estimated economic life of the trucks is 10 years.
No substantial uncertainties exist as to future payments Jordan must make, and potential customers are thoroughly checked for creditworthiness before the trucks are leased to them.

Jordan’s accountant has informed the company that there are advantages from a reporting standpoint in treating the leases as sales-type instead of operating leases.

QUESTION:

1) Discuss the reasons why Jordan would want to treat the leases as a sales-type instead of operating leases.

Reference no: EM13138362

Questions Cloud

What is the mass of the steel bar : 95.0 mL of H_2O is initially at room temperature (22 C). A chilled steel rod at 2 C is placed in the water. If the final temperature of the system is 21.4 C, what is the mass of the steel bar?

The malard manufacturing company : Academy of Management Journal, Published by Academy of Management, www.aom.pace.edu/amj/ (ISSN 0001-4273) Semester 2, 2013. Assessment Task 1: Case study (Worth 20%).

Single taxpayer with no dependents : Ted thomas a single taxpayer with no dependents has the following transactions in 2010- long term capital gain 18,000. If his agi were 25,000 what is the maximum rate at which it would be taxed?

What are the total period costs incurred this period : What are the total Period Costs incurred this period?

Discuss reasons why jordan would want to treat the leases : Discuss reasons why Jordan would want to treat the leases as a sales-type instead of operating leases.

How many units did they manufacture during the month : Rancor Inc. had a per-unit conversion cost of $2.50 during April and incurred direct materials cost of $100,000, direct labor costs of $75,000, and overhead costs of $45,000 during the month. How many units did they manufacture during the month?

Selling your team''s services to cango : Selling your team's services to CanGo

Compute the incremental costs of upgrading the material : Beck Company is concerned about quality and is considering upgrading the materials used in its product to a higher quality. Doing so would cost an additional $1.65 per unit.

Problem regarding lease or buy : Lease or buy: I can lease a building for $10,000 or buy for $800,000. The weighted average cost of capital is 12%. Which is cheaper buy or lease?

User Account

All Pages