Moreover, Small Fries Inc. should not report the repairs and maintenance in their balance sheet as aggregate cost but instead designated the expense to each facility as each expense is incurred. According to 210-10-S99 SEC materials, Accumulated depreciation, depletion, and amortization of property, plant and equipment. The amount is to be set forth separately in the balance sheet or in a note thereto. It should be recorded in the year when it is happening and make notes to the financial statement to that
FASB ASC 840-10-25-4 provides guidance on whether lease payments constitute minimum lease payments: Lease payments that depend on a factor directly related to the future use of the leased property, such as machine hours of use or sales volume during the lease term, are contingent rentals and, accordingly, are excluded from minimum lease payments in their entirety. However, lease payments that depend on an existing index or rate, such as the consumer price index or the prime interest rate, shall be included in minimum lease payments based on the index or rate existing at lease inception. The lease payments of $100,000 at the end of each year constitute minimum lease payments because according to the lease agreement, these payments do not depend on any contingent rentals but depend on Lessor’s existing interest rate. According to FASB ASC 840-10-25-6(b), Lessee should also include $20,000 of the guaranteed residual value in the minimum lease payments because Lessee guaranteed and stated this amount in the
3. A lease that contains a purchase option must be capitalized by the lessee. 4. Executory costs should be excluded by the lessee in computing the present value of the minimum lease payments. 5.
Abuse in this case means the debtor is filing for bankruptcy but may have income (from an annuity or other forms of cash inflows) that could be used to pay off some or all of the debt, in which case a Chapter 7 would be dismissed and a Chapter 13 bankruptcy would be recommended (repayment plan), although the debtor would have to wait 180 days after the dismissal to submit a new petition. Another reform that came with this Act was the requirement to give the creditor 90 day notice before declaring bankruptcy. A declaration of bankruptcy will generally stay on a debtor’s credit report for 10 years and may negatively affect the debtor’s request for credit lines. However, by the time the debtor has filed for bankruptcy, their chances for obtaining new forms of credit are already jeopardized by a ruined credit score. Therefore, creditworthiness is usually overemphasized in the decision to file for bankruptcy.
Chapter 8: Date placed in service (see concept summary 8.1 in the text). The applicable system of depreciation or cost recovery is dependent on the date the property is placed in service. The small business jobs act of 2010 extended 50% additional first-year depreciation for qualified property acquired and placed in service before january 1, 2011. The tax relief act of 2010 extended additional first-year depreciation for qualified property acquired and placed in service before january 1, 2013. The percentage is 100% for property placed in service after september 8, 2010 and before january 1, 2012.
Case: Lucas Co. Lucas Co. is a manufacturing company that has entered into a lease agreement with Lessor Co. to lease equipment. Lucas has a positive cash flow for several years and is in compliance with all its debt covenants. The lease agreement is signed on December 15, 2004 and the usage of equipment begins on January 1, 2005. Under ASC 840, Leases, the lease is classified as a capital lease with a 5-year lease term. There is no option to negotiate for renewal provided in the lease agreement.
In this particular capital lease, the lessor requires Lucas Co to pay for general repair and maintenance. According to ASC 840-10-25-5, “For a lessee, minimum lease payments comprise the payments that the lessee is obligated to make or can be required to make in connection with the leased property, excluding both of the following: a. Contingent rentals b. Any guarantee by the lessee
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Due to the lack of substance of a patent and the long term benefit a patent can provide, a patent is classified as an intangible asset for accounting treatment. FASB Accounting Standard Codification subtopic 350 discusses accounting for intangible assets. The costs associated with an intangible asset are amortized over the useful life of the asset. The useful life is determined by the expected period of time the asset is expected to contribute to future cash flows of the reporting entity (ASC 350-30-35-2). Legal or contractual obligations can also help determine the useful life of an intangible asset.
The car is used 70% for business and 30% for personal use (Assume that this percentage is maintained for the life of the car.). She does NOT elect to take additional first-year depreciation. Determine the cost recovery deduction for 2011. Question : (TCO 10) Which of the following is correct? Question : (TCO 10) On May 2, 2011, Karen places in service a new sports utility vehicle that costs $70,000 and has a gross vehicle weight of 6,300 lbs.