The basic concept of “substance over form” influences lease accounting. Explain.
Answer to relevant QuestionsHow is interest determined in a capital lease transaction? How does the approach compare to other forms of debt (say bonds payable or notes payable)?Lukawitz Industries leased equipment to Seminole Corporation for a four-year period, at which time possession of the leased asset will revert back to Lukawitz. The equipment cost Lukawitz $4 million and has an expected ...When are initial direct costs recognized in an operating lease? In a direct financing lease? In a sales-type lease? Why?The IASB and FASB are collaborating on a joint project to revise accounting standards for leases. Briefly describe the direction the project is taking.In the situation described in BE 15-8, assume the asset being leased cost the lessor $125,000 to produce. Determine the price at which the lessor is “selling” the asset (present value of the lease payments). What would ...
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