The junior accountant interpreted the lease as an operating lease based on the fact that the equipment reverts to the lessor at the end of the lease. However, in this case, all risks and rewards of ownership are substantially transferred to the lessee. 2. IAS 17-paragraph 10 states that classifying a finance lease depends on the substance of the transaction rather than the form of the contract by meeting individually or in combination situations (a) through (e). Of these situations, two have been met: (c) the lease term is for the major part of the economic life of the asset even if title is not transferred and (d) at the lease inception, the present value of the minimum lease payments amount to at least substantially all of the fair value of the leased asset.
If the lease were to be capitalized, what should be the depreciation life? 3. Suppose that Wallace Company had structured the lease to: 1) require an appraisal of the property value at the end of the lease term and 2) allow LeMay Company to purchase the land and building at a price equal to the appraised value. How, if at all, would this change your answer to questions 1 and 2? Explain Problem 2: Sale-Leaseback Sangamon signs a sale-leaseback with a buyer, Bismark.
Yes No c. No No d. No Yes 2. Under the temporal method, monetary assets and liabilities are translated by using the exchange rate existing at the: a. beginning of the current year. b. date the transaction occurred. c. balance sheet date. d. None of these.
This summary will be assessing the requirements of Statement of Financial Accounting Standards (SFAS) 116 and 117 and how it impacts the financial statements. The Statement No. 116 addresses Accounting for Contributions Received and Contributions Made, contributions consist of gifts of cash, marketable securities, property and equipment, utilities, supplies, intangible assets (such as patents and copyrights), and the services of professionals and skilled workers (University of Phoenix, 2007, p.490). These contributions have to be accounted for at fair value, unless their is a particular collection or contributed service. Statement No.
See also paragraph 12b. (5) When excess leave is authorized in conjunction with regular leave, care shall be taken that no leave is accrued during the period of excess leave involved. c. Exceptions. Excess leave may be granted as an exception to the 60-day aggregate policy, for completion of education leading to professional degrees, including associated licensing examinations, for service as commissioned Marine officers (a specific example of this exception is the Excess Leave Law Program). In these cases, Marines will not be required to use their accrued leave prior to being placed in an excess leave status and their accrued leave balance will be retained until they resume duty in a pay status.
Firstly the lease term must be greater than 75% of the asset's estimated economic life. Secondly the lease contains an option to purchase the asset for substantially less than fair market value at the end of the lease term. Lastly the present value of the lease payments is greater than 90% of the fair makers value of the asset. An example of a capital lease is a company purchasing a piece of heavy equipment that they pay in installments and purchase at the end of the lease. A direct finance lease occurs when the lessor of an asset is not the maker or dealer, but purchases the item with the intent of leasing it.
Cost of capital As Roper Industries uses a mix of equity and debt to finance its acitivities, the cost of capital will be calculated as a weighted average of the various sources of funding. No cost of preferred stock will be calculated as it is not used by the firm. Risk-free rate The first element that we need to evaluate in order to calculate the cost of capital is the risk free rate. To do so,
Note that the general recognition criteria applies to self-constructed assets, i.e., the costs can be capitalized if, and only if: (a) it is probable that future economic benefits associated with the item will flow to the entity, and (b) the cost of the item can be measured reliably. The capitalization of borrowing costs is covered by IAS 23. The standard defines a qualifying asset as ‘an asset that necessarily takes a substantial amount of time to get ready for its intended use or sale’ (IAS 23.5). This includes intangible assets and inventory, but excludes inventories that are routinely manufactured or otherwise produced in large quantities or on a repetitive basis. Examples of these would include items that take some time to manufacture but that are sold as standard items such as residential housing, subway cars, aircraft, etc… (IAS 23.4).
Short-term investments would show a balance of $57,000. Investments (long-term) will show a balance of $21,000. The miscellaneous expense that is reported on the income statement should be separately reported, as “users should be made aware of events reported in the income statement that are not likely to occur again in the foreseeable future” (Spiceland, Sepe, & Nelson, 2011, p. 180). This item would move below income from continuing operations and should be considered a loss. Similar to the assets section, the liabilities section should be divided into current and long-term liabilities.
Define the following: a. Assets – property owned by a person or company having value and available to alleviate debts, commitments or legacies b. Current asset- an asset that is easily convertible to cash c. Liability- a responsible debt or financial obligation legally attached to an individual or organization d. Current liability – obligations that are settled by current assets that are settled within a fiscal year or operating cycle. e. Contributed capital- Capital contributed through the purchase of stock to a corporation or property an owner or shareholder places into an organization in return of a equity position f. Retained earnings- Saved portion of net income that is not returned to investors usually retained once the shareholders receive a portion of their profits 3. Explain what the following accounting terms means: a. Separate-entity assumption – stated information that the corporation, its stakeholders, and its shareholders are separate entities b. Unit-of-measurement assumption- reported financial results by business entity accounts in terms of national/standard monetary unit throughout c. Continuity assumption – can be called going-concern assumption, basic statement that the corporation will pursue its objectives for the foreseeable future without being liquidated d. Historical cost principle - (cost principle) presented cost of an asset based on new history of value.