How the gain on the sale portion of the sale-leaseback

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General Tools is seeking ways to maintain and improve cash balances. As company controller, you have proposed the sale and leaseback of much of the company's equipment. As seller-lessee, General Tools would retain the right to essentially all of the remaining use of the equipment. The term of the lease would be six years. A gain would result on the sale portion of the transaction. The lease portion would be classified appropriately as a capital lease.

Give a memo to your CFO.

Question 1: How the sale portion of the sale-leaseback transaction should be accounted for at the lease's inception.

Question 2: How the gain on the sale portion of the sale-leaseback transaction should be accounted for during the lease.

Question 3: How the leaseback portion of the sale-leaseback transaction should be accounted for at the lease's inception.

Question 4: The conceptual basis for capitalizing certain long-term leases

Reference no: EM132574759

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