WEEK 5. Individual Assignment - WEEK 5 Individual...

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WEEK 5 Individual Assignment: Assignments from the Readings Resources: Financial Accounting: Theory and Analysis Prepare responses to the following assignment from the e-text: Assignments from the Readings Ch. 13: Case 13-4 Application of SFAC No. 13 On January 1, 2006, Lani Company entered into a non-cancelable lease for a machine to be used in its manufacturing operations. The lease transfers ownership of the machine to Lani by the end of the lease term. The term of the lease is eight years. The minimum lease payment made by Lani on January 1, 2006, was one of eight equal annual payments. At the inception of the lease, the criteria established for classification as a capital lease by the lessee were met. Required: A. What is the theoretical basis for the accounting standard that requires certain long-term leases to be capitalized by the lessee? Do not discuss the specific criteria for classifying a specific lease as a capital lease.
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