M351 Notes-Day 9 Leases 1

M351 Notes-Day 9 Leases 1 - 8,341,507 Lessor entry:...

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M351 Notes, Class 9: Leases, pages 1153-1161 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 1159 has representative entries for the lessee (capital lease) and lessor (direct financing lease). D. The adjusting entries on 12/31/11 should include: Lessee entry: Interest expense. ................................................ 8,341,507 Interest payable. .........................................
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Unformatted text preview: 8,341,507 Lessor entry: Interest receivable. ............................................ 8,341,507 Interest revenue. ........................................ 8,341,507 The entries on 1/1/12 should include: Lessee entry: Interest payable. ................................................ 8,341,507 Capital lease liability. ........................................ 2,145,936 Cash. .......................................................... 10,487,443 Lessor entry: Cash. .................................................................. 10,487,443 Interest receivable. ..................................... 8,341,507 Lease receivable. ....................................... 2,145,936 1...
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This note was uploaded on 02/06/2011 for the course MGMT 351 taught by Professor Staff during the Spring '08 term at Purdue.

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