Is atinceptionoftheleasethelessorwillrecord

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Unformatted text preview: rd the Cost of Goods Sold as well as the Sales the Cost of Goods Sold as well as the Sales Revenue (PV of payments). Revenue (PV of payments). 15-25 Slide 26 Sales-Type Leases On January 1, 2009, Matrix, Inc. signed a 5-year On lease with RentPro, Inc. for equipment. The lease specifies annual payments of $6,000 beginning 1/1/09 and at each December 31st beginning through 2012. through The equipment has an economic life of 5 years The and a fair value of $25,873. The equipment fair The has a cost basis in the hands of RentPro of $19,873. Matrix has an incremental borrowing $19,873 Matrix rate of 8%, which is the same as the implicit rate used by RentPro to calculate the annual payment. payment. 15-26 Slide 27 Sales-Type Leases: Lessee Matrix makes the following entries at Matrix inception of the lease. inception GENERAL JOURNAL Date Description Jan 1 Leased equipment Lease payable Lease payable Cash Debit Credit 25,873 25,873 6,000 6,000 15-27 Slide 28 Sales-Type Leases: Lessor Because the cost of the asset is not equal to its Because the cost of the asset is not equal to its Because Because ffair value, the lease is classified as a air value, the lease is classified as a Sales-Type Lease.. Sales-Type Lease Sales-Type Sales-Type RentPro makes the following entries at inception of the lease. GENERAL JOURNAL Date Description Debit Jan 1 Lease receivable Cost of goods sold Sales revenue Inventory of equipment 25,873 19,873 Cash Lease receivable Credit 6,000 25,873 19,873 6,000 15-28 Slide 29 Part B: Bargain Purchase Option A provision of some lease contracts that gives the lessee the option of purchasing the leased asset at a bargain price. Lessee Assume lessee will exercise BPO Then, treat as an additional payment at the end of lease Lessor: When a lease is signed Calculate PV of the BPO Reduce PV of asset by PV of BPO in order to calculate the amount to be recovered through the lease 15-29 Slide 30 Bargain Purchase Option (BPO) On January 1, 2011, Sans Serif Publishers, Inc., leased a color copier from CompuDec Corporation at a price of $479,079. The lease agreement spe...
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This note was uploaded on 02/09/2013 for the course ACCOUNTING 3000 taught by Professor Li during the Spring '13 term at CUNY Brooklyn.

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