You are a senior auditor auditing the December 31, 2014 financial statements of Deng, Inc., a manufacturer
Question:
1. It is a non-cancellable term of 50 months.
2. The rental is $220 per month at the end of each month. (The present value at 1% per month is $8,623.)
3. The estimated residual value after 50 months is $2,100. (The present value at 1% per month is $1,277.) Deng guarantees the residual value of $2,100.
4. The automobile's estimated economic life is 60 months.
5. Deng's incremental borrowing rate is 12% per year (1% per month).
Instructions
Write a memo to your supervisor, the audit partner in charge of this audit, to discuss the situation. Be sure to include the following:
(a) Why you inspected the lease agreement,
(b) What you determined about the lease, and
(c) How you advised your client to account for this lease.
Explain every journal entry that you believe is necessary to record this lease properly on the client's books.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
Intermediate Accounting
ISBN: 978-1118300855
10th 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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