Explain the transition rules

Reference no: EM131964334

Case Project -

You are Janet Wilt, CPA. The president of one of your clients, Boarshead Corporation, emailed you the following message:

Janet, I was at a conference today and they were talking about some new lease regulations and how that may impact our financial statements. I know that we have a couple of leases, one that we record as a liability and one that we do not. How will this new lease requirement impact us? When does this go into effect? Will we need to restate prior financial statements? Are there any retrospective entries that we have to make? If so, what are they and when do we need to record them? They also talked about adopting early. I may be interested in early adoption. What would we need to do to implement this change this year?

Don Collizi

President, Boarshead Corporation

Upon investigation of Boarshead's records, you found that Boarshead had had two leases. One that is currently being accounted for as a capital lease and one being treated as an operating lease (under current standards).

The capital lease was for equipment. The lease started in 2016 and was a 5-year lease of annual lease payments of $50,000, starting on January 1, 2016. The lease also had a bargain purchase option for $20,000 at the end of the lease. The equipment had a useful life of 6 years and Boarshead uses the straight-line method of depreciation. The implicit interest rate for this lease was 6%.

The operating lease was a 15-year lease for their facilities that started on January 1, 2015. The lease consisted of annual rental payments, starting on January 1, 2015 of $60,000. When they started the lease in 2015, the expected useful life of the facility was 30 years. Boarshead imputed interest rate is 8%.

Required: Reply to Don Collizi. Write a memo or letter (use proper format for a letter or memo) to Don explaining the new lease requirements as they apply to Boarshead. Be sure to include the following:

1. Explain the transition rules (what will need to be done to adopt the new standard). Be sure to include adoption dates.

2. Assuming that Boarshead will do early adoption and adopt ASU 2016-2 in 2018, what liabilities and assets will need to be reported in the 2017 and 2018 comparative financial statements.

3. Assuming adoption in 2018, what journal entries will need to be made in 2018 for the transition to the new lease standard?

4. Assuming adoption in 2018, what are the new year-end (December 31, 2018) adjusting entries that will need to be made?

Attachment:- Assignment File.rar

Reference no: EM131964334

Questions Cloud

Why Milton made Satan a sympathetic character : You must conduct research to look into the theories about why Milton made Satan a sympathetic character and use that research to support your argument

How much do you have left in us dollars : You convert your remaining euros back to U.S. dollars upon your return. If the exchange rates remained the same over your trip.

Write a paper about antibiotics resistance to human health : Write a paper about antibiotics resistance to human health. You may include pictures, tables and other material but please include all references.

Define what does the market believe will be the stock price : Crisp Cookware's common stock is expected to pay a dividend of $1.5 a share at the end of this year (D1 = $1.50); its beta is 1.00. The risk-free rate is 5.4%.

Explain the transition rules : Reply to Don Collizi. Write a memo or letter to Don explaining the new lease requirements as they apply to Boarshead. Explain the transition rules

How much total interest will you pay over repayment period : For a credit card with a balance of $7,500 and an interest rate of 14.99% (monthly compounding, charged on the outstanding balance each month).

What is a case-fatality rate and what does it measure : What is a case-fatality rate? What does it measure? How might you explain the discrepancy between the hospital cases and reported cases?

Create a document flowchart with the information case : Create a document flowchart (DIVIDE BY DEPARTMENTS) with the following information Case: Madison Water district bills its customers on a monthly cycle.

Create program that allows user to interactively check out : ITECH1400 – Foundations of Programming - Create a computer program that allows a user to interactively check out a number of products, then provides

User Account

All Pages