Estimated economic life of the machine

Assignment Help Finance Basics

Reference no: EM13834390

On January 1, Year 8, Von Company entered into two non-cancellable leases of new machines for use in its manufacturing operations. The first lease does not contain a bargain purchase option, and the lease term is equal to 80% of the estimated economic life of the machine. The second lease contains a bargain purchase option, and the lease term is equal to 50% o the estimated economic life of the machine.

Required:

a. Explain the justification for requiring lessees to capitalize certain long-term leases. Do no limit your discussion to the specific criteria for classifying a lease as a capital lease.

b. Describe how a lessee accounts for a capital lease at inception.

c. Explain how a lessee records each minimum lease payment for a capital lease.

d. Explain how Von should classify each of the two leases. Provide justification

Reference no: EM13834390

Questions Cloud

Golf course installing a new automaticsprinkler system : Scenario:Golf Course installing a new AutomaticSprinkler SystemThe eighteen-hole Redwood Golf Course is in need of a new sprinkler system, which is estimatedto cost $1 million. The Golf Course Superintendent, who is in charge of maintaining the golfc..

How much did the stock price change over the past year : Shareholders had a good year, earning a 18% annual rate of return. The P/E ratio today is 13.9 and the company just announced earnings per share of $3.20 . The company has a 25% payout ratio. How much did the stock price change over the past year?a. ..

The direct transfer of funds from investors : In the last decade there has been a shift towards the direct transfer of funds from investors to the corporate sector. examine some of the reasons for this trend

Process consists of two welding machines in parallel : Q1) The layout of a process consists of two welding machines in parallel, one grinding and one drilling machine. Two panels are released simultaneously to two welding machines where some parts are fitted to the panels using these welding machines. Th..

Estimated economic life of the machine : On January 1, Year 8, Von Company entered into two non-cancellable leases of new machines for use in its manufacturing operations. The first lease does not contain a bargain purchase option, and the lease term is equal to 80% of the estimated economi..

Restaurant purchasing a pos systemnance''s restaurant : Restaurant Purchasing a POS SystemNance's Restaurant, a local independent restaurant, is evaluating new point-of-sale (POS) systemsand must determine if a new installation is feasible. A new POS installation would includeboth software and hardware, w..

Effective annual rate : Discuss what is meant by the "effective annual rate" when there is more than one compounding period in a year.

Risk measurement terms : Distinguish among the following risk measurement terms: beta, r-squared, covariance, and correlation coefficient.

Market value of a hotel or restaurant investment : In 250 Words explain what are some of the factors used to consider the market value of a hotel or restaurant investment? Other than "location, location, location," is one factor more important than another? Is market value always a good indicator of ..

User Account

All Pages