SAT Case 13-2-Power Point-2010

SAT Case 13-2-Power Point-2010 - Collectability of the...

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Kelsey Johnson & Steven Judd
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a.  Capital Lease It meets the requirement that the present value of the minimum lease payments equals or exceeds 90% of the fair value of the leased property less any related investment tax credit retained by the lessor. 10,000 – PMT; 20 – N; 10 – I/Y PV = 93,649 93,649/92625 = 101.1%
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b.  When capitalized, the asset is recorded as a debit and the liability to the lessor is recorded as a credit. Lease Property 93,649 Lease Obligation 93,649
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c.  Income Statement Depreciation Expense Interest Expense Balance Sheet Lease Obligation minus payments Lease Property minus depreciation Schedule of Cash Flows Cash outflow for payment Depreciation inflow (added back)
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d.  Grant will record the lease as a sales-type lease because of the 90% criteria. Two other criteria must be met for the lessor:
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Unformatted text preview: Collectability of the minimum lease payments is reasonably predictable. No important uncertainties surround the amount of unreimbursable costs yet to be incurred by the lessor under the lease. If more information could be included to determine this, that would be helpful. e. Grant: January 2, 2009 Lease Property Receivable 200,000 COGS 75,000 Unearned Interest Revenue 107,375 Property 75,000 Sales 92,625 Residual value not taken into account due to being immaterial. f. Income Statement Depreciation expense Initial direct costs associated with obtaining the lease if immaterial. Balance Sheet Continue to carry the asset minus any depreciation Statement of Cash Flows Operating Interest received in cash Rental payment in cash...
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SAT Case 13-2-Power Point-2010 - Collectability of the...

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