Mickelson reports on a calendar year basis. On January 1, 2017, Mickelson Corporation enters into a three-year
Question:
Mickelson reports on a calendar year basis. On January 1, 2017, Mickelson Corporation enters into a three-year lease with annual payments of $30,000. The first payment will be due on December 31, 2017. The present value of the payments at 8% is $77,313. If the lease is classified as a capital lease, the following amortization table would be used to record interest expense:
Required:
1. If the lease were classified as an operating lease under ASC 840, show for each year the effects on the operating, investing, and financing activities sections of the statement of cash flows (direct method).
2. If the lease were classified as a capital lease under ASC 840, show for each year the effects on the operating, investing, and financing activities sections of the statement of cash flows (direct method). Assume that the leased asset is depreciated over three years.
3. If the lease were classified as an operating lease under ASU 2016-02 (ASC 842), show for each year the effects on the operating, investing, and financing activities sections of the statement of cash flows (direct method).
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...
Step by Step Answer:
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer