Synergetics Inc. leased a new crane to M. K. Gumowski Construction under a 5-year noncancelable contract starting
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(a) Identify the type of lease involved and give reasons for your classification. Discuss the accounting treatment that should be applied by both the lessee and the lessor.
(b) Prepare all the entries related to the lease contract and leased asset for the year 2008 for the lessee and lessor, assuming:
(1) Insurance, $500.
(2) Taxes, $2,000.
(3) Maintenance, $650.
(4) Straight-line depreciation and salvage value, $10,000.
(c) Discuss what should be presented in the balance sheet and income statement and related notes of both the lessee and the lessor at December 31, 2008.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... 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...
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Related Book For
Intermediate Accounting principles and analysis
ISBN: 978-0471737933
2nd Edition
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
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