When is a lease a capital idea? Laurie Gocker, Inc., entered into a lease arrangement with Nathan
Question:
Gocker and Morgan are engaging in negotiations for terms of the lease. Some other relevant facts are as follows:
1. Morgan wants to take possession of the machine at the end of the initial lease term.
2. The term may run from four to five years, at Gocker’s discretion.
3. Morgan estimates the machine will have no residual value, and Gocker will not purchase it at the end of the lease term.
4. The present value of minimum lease payments on the machine is $890,000.
Requirements
1. What is (are) the ethical issue(s) in this case?
2. Who are the stakeholders? Analyze the consequences for each stakeholder from the following standpoints:
(a) Economic,
(b) Legal,
(c) Ethical.
3. How should Gocker structure the lease agreement?
4. As of the date of this text, the FASB and IASB have issued a joint exposure draft of a new standard on long-term leases that will require companies to capitalize most leases like this one. How will the analysis of this case change when this standard is issued?
Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Financial Accounting
ISBN: 978-0133427530
10th edition
Authors: Walter Harrison, Charles Horngren, William Thomas
Question Posted: