On October 30, 2017, Truttman Corp. sold a five-year-old building with a carrying value of $10 million
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(a) Why would Truttman have entered into such an agreement?
(b) In reaching a decision on how to classify a lease, why is it important to compare the building's fair value with the present value of the lease payments, and its useful life with the lease term? What does this information tell you under ASPE and IFRS 16?
(c) Assuming that Truttman would classify this as an operating lease, determine how the initial sale and the sale-leaseback transaction would be reported under ASPE for the 2017 year. What would be the implications if the selling price had been $14 million, $1 million greater than the fair value of the building?
(d) Assuming that Truttman would classify this as a capital lease, determine how the initial sale and the sale-leaseback transaction would be reported under ASPE for the 2017 year.
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Related Book For
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
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