Session 23 leases III 20 (2) - Class23:LeaseIII HyeSunChang...

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Class 23: Lease III  Hye Sun Chang ACCY 303  
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Recap Recap       Dell rents equipment for three years for $20,000 per year. The equipment is  valued at $200,000. At the end of the rental term the equipment must be  returned to the dealer.        Dell rents equipment for five years for $80,000 per year. At the end of the  rental term Dell can purchase the equipment for $500. At the date the contract  was signed the equipment had a value of $300,000. At the end of five years, it  is expected the equipment will have a value of $42,000.        Dell rents equipment for seven years. The life of the equipment is ten years.  The fair value of the equipment is $100,000. The present value of the  minimum lease payments is $85,000.         Dell rents equipment for ten years. At the end of the lease Dell receives title to  the equipment.  Operating Lease Capital Lease Operating Lease Capital Lease 1. Transfer of title 2. Bargain purchase 3. 75% of useful life 4. 90% of net FMV 1. The lease transfers property rights in the leased asset to the lessee and  2. The lease allows reasonably accurate estimates regarding the amount and        collectiblity of the net cash flows to the lessor.
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Recap (Lessor Accounting) Recap (Lessor Accounting) Unearned interest revenue= sum of undiscounted MLP -fair value of the leased asset Unearned interest revenue= carrying amount of the net investment *interest rate
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Recap Recap HSC Co. leased equipment from SYK Corp. on July 1, 2004 for  an eight-year period expiring June 30, 2012 . Equal payments  under the lease are $20,000 and are due on July 1 of each year.  The first payment was made on July 1, 2004. The rate of 
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Session 23 leases III 20 (2) - Class23:LeaseIII HyeSunChang...

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