On January 1 Borman Company, a lessee, entered into three non-cancelable leases for brand new equipment, Lease
Question:
(a) Lease J does not contain a bargain purchase option. The lease term is equal to 80% of the estimated economic life of the equipment.
(b) Lease K contains a bargain purchase option. The lease term is equal to 50% of the estimated economic life of the equipment.
(c) Lease L does not contain a bargain purchase option. The lease term is equal to 50% of the estimated economic life of the equipment.
Required
1. Explain how Borman Company should classify each of the preceding three leases. Discuss the rationale for your answer.
2. What amount, if any, should Borman record as a liability at the inception of the lease for each of the preceding three leases?
3. Assuming that the minimum lease payments are made on a straight-line basis, how should Borman record the minimum lease payment for each of the preceding three leases?
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Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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