On January 1, 2019, Perriman Company transferred equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment. The term of the lease is 8 years.
Instructions
a. What is the major issue related to sale-leaseback accounting?
b. 1. How should Perriman account for the sale portion of the sale-leaseback transaction at January 1, 2019?
2. How should Perriman account for the leaseback portion of the sale-leaseback transaction at January 1, 2019?