Class9-Leases3

Class9-Leases3 - Lease liability.

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M351 Notes, Class 9: Leases, pages 1128-1131 Today’s topics Sale-leaseback accounting A. Reasons to enter into a sale-leaseback: 1. Financing —can increase percentage financed, may be feasible when more traditional forms of financing are closed, may have an attractive interest rate 2. Taxes —can help avoid alternative minimum tax. B. “Profit ” from sale part of sale-leaseback is amortized over the lease term; “losses ” are recognized immediately. C. Sale-leaseback example in illustration 21B-1 on page 1130 has representative entries for the lessee (capital lease) and lessor (direct financing lease). D. The adjusting entries on 12/31/08 should be as follows: Lessee entry: Interest expense. ................................................ 8,341,507
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Unformatted text preview: Lease liability. ................................................... 2,145,936 Capital lease installment payable. ............. 10,487,443 Lessor entry: Capital lease installment receivable. ................. 10,487,443 Interest revenue. ........................................ 8,341,507 Lease asset. ................................................ 2,145,936 The entries on 1/1/09 should be as follows: Lessee entry: Capital lease installment payable. ..................... 10,487,443 Cash. .......................................................... 10,487,443 Lessor entry: 1 Cash. .................................................................. 10,487,443 Capital lease installment receivable. ......... 10,487,443 2...
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Class9-Leases3 - Lease liability.

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