Synergetics Inc. leased a new crane to Gumo Construction Inc. under a six-year, non-cancellable contract starting February
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(a) Identify the type of lease that is involved and give reasons for your classification. Also discuss the accounting treatment that should be applied by both the lessee and the lessor.
(b) Would the classification of the lease have been different if Synergetics and Gumo had been using ASPE?
(c) Prepare all the entries related to the lease contract and leased asset for the year 2017 for the lessee and lessor, assuming the following executory costs: insurance of $450 covering the period February 1, 2017 to January 31, 2018 and a one-year maintenance contract beginning February 1, 2017 costing $1,400. Straight-line depreciation is used for similar leased assets. The crane is expected to have a residual value of $20,000 at the end of its useful life.
(d) Identify what will be presented on the statement of financial position and statement of income of both the lessee and the lessor at December 31, 2017.
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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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