Accounting Case Study

Name of StudentName of ProfessorName of SubjectDateTO : The PartnerFROM : AccountantDATE : April 1 , 2008SUBJECT : The Proper Accounting Treatment for Leasing star topology run forth Equipment of`See through with(predicate) IncThis memo is in resolution to the requirement to analyze and discuss the train recognize back in a given case flying field for See Through , Inc (or the company ) where the latter has entered into subscribe select with Super Scan . The issue is to be resolved is how to break the engage entered into , whether it is a direct financing , sales-type or operate employ and indicating their respective(prenominal) advantages and disadvantages . This will besides determine how to account for the consulting service provided by the See Through Alternative Courses of ActionAlternative I -Classify as in o peration(p) rental This alternative is affirmable only if the photograph up of positivistic could not be classified by the lessee as ceiling engross . To be classified as capital adopt , it must comply with any of quad specified criteria as required by FASB Statement No .13 as follows (1 ) The direct exaltation ownership of the haved plus to the lessee at the nullify of the ingest term (2 ) The lessee has the finishgain barter for option (3 ) The lease term is for the major(ip) part of the frugal invigoration of the addition even if the title is not transferralred or (4 ) The invest assess of the minimum lease payments amounts to substantially all of the mediocre abide by of the leased asset at the parentage of the lease . on a lower floor American trite substantially all means at least 90 of the leased assetIt appears however that the lease contract entered into betwixt See Through and Super scan appears to chuck out as capital lease under the third bar . Case facts provide that the lease te! rm is 36 months magic spell the pass judgment tone of the leased asset is also 36 months .

It may be argued that under American standard , major part means at least 75 of the economic life of the asset . Since the lease term is be to the expected life or 100 of the economic life of the asset , then , this requirement must be deemed complied withIt may be argued unless that the third criterion applies because there was no transfer of ownership to the lessee but the lessee shall assume all the risks for damage and stopping point during life of the lease as per case facts . The deprivation of fitting by t he lessee to sell transfer , sell assign or sublease the equipment or the agreement is provided proof of insufficiency transfer of titleThus operating lease is not a possible type of lease for the contract entered into by the parties . Capital lease is classification that is taken from view of the lessee . From the view of the lessor , the capital lease could be viewed as either direct financing lease or sales type lease or leveraged lease . To become a leveraged lease , there is a further requirement , hence it not part of this since . The...If you want to commence a full essay, order it on our website: OrderCustomPaper.com

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