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How should the lease transaction for flynn co be recorded

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Reference no: EM132985665

Presented below are three different lease transactions in which Ortiz Enterprises engaged in 2010.Assume that all lease transactions start on January 1, 2010.In no case does Ortiz receive title to the properties leased during or at the end of the lease term.

Lessor Renner Co. Flynn Co. Miley Inc. Type of property Bulldozer Truck Furniture Bargain purchase option None None None

Lease term 4 years 6 years 3 years

Estimated economic life 8 years 7 years 5 years

Yearly rental $13,000 $20,000 $ 3,000

Fair market value of leased asset $80,000 $96,000 $20,500

Present value of the lease rental payments $48,000 $82,000 $ 9,000

Instructions

Problem (a) Identify the leases above as operating or capital leases. Explain.

 

Problem (b) How should the lease transaction for Flynn Co. be recorded on January 1, 2010?

Problem (c) How should the lease transaction for Miley Inc. be recorded in 2010?

Reference no: EM132985665

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