To: From: Subject: Lease Type and Lease Structure This memo includes research on leases and lease structure. Through intensive research on the Financial Accounting Standards Board (FASB)‚ three sub-types of leases were found for lessors to account for the leases. The three sub-types are direct financing‚ sales-type‚ and operating leases. The international accounting standards board (IASB) and FASB are proposing a draft for lease accounting. The critics are disputing some
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Question 1 ( 5 points) In a world with no frictions (taxes‚ etc.)‚ value is created by how you finance a project. True. False. Question 2 (5) The return of equity is equal to the return on debt of a project/firm Always true. Never true. Sometimes true. Question 3 (10 points) Moogle‚ Inc. is in the same business as Google‚ Inc.‚ but has recently retired all its debt to become an all-equity firm. Its return on equity has dropped from 12.25% to 10.60% as a result of this. Google‚ Inc. continues
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Entries for Lessee) Grady Leasing Company signs an agreement on January 1‚ 2012‚ to lease equipment to Azure Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 5 years with no renewal option. The equipment has an estimated economic life of 5 years. 2. The fair value of the asset at January 1‚ 2012‚ is $90‚000. 3. The asset will revert to the lessor at the end of the lease term‚ at which time the asset is expected to have a residual value of $7‚000‚ none
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000 Dr. (g) Benefits 40‚000 Dr. 40‚000 Cr. JE 12/31 82‚120 Dr. 55‚000 Cr. 27‚120 Cr. Balance‚ 12/31/08 40‚920 Cr. 737‚400 Cr. 613‚480 Dr. 83‚000 Dr. E17-2 (a) To Delaney‚ the lessee‚ this lease is a capital lease because the terms satisfy the following criteria: The lease term is greater than 75% of the economic life of the leased
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where the user (lessee) of the equipment selects the equipment and is allowed to use the equipment during the period of the lease by paying a predetermined lease rental. The legal ownership continues to vest with the leasing company (lessor). The main difference between the hire purchase and leasing relates to the ownership and accounting treatment. While in the case of lease the ownership of the equipment always remains with the leasing company (the lessor); the ownership in the case of hire purchase
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million dollars It’s not an operating lease. Session 8: In-Class Discussion Case #2 - Bear Minimum Provision 3: 25-4 This guidance addresses what constitutes minimum lease payments under the minimum-lease-payments criterion in paragraph 840-10-25-1(d) from the perspective of the lessee and the lessor. 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
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References: Ross‚ S.‚ Westerfield‚ R.‚ Jaffe‚ J.‚ & Jordan‚ B. (2011). Corporate Finance: Core Principles and Applications (3rd ed.). Boston: McGraw-Hill Irwin. ISBN: 978-0-07-353068-0.
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2012‚ All-In and Off-Book entered into an arrangement in which Off-Book will purchase land in a specific location and build a casino according to All-In’s specifications. Once the construction is complete (expected by January 1‚ 2014)‚ Off-Book will lease the casino to All-In. Although All-In provided the overall design and layout of the casino‚ Off-Book is responsible for all construction activities. The budgeted cost of constructing the casino is $60 million. Off-Book will pay all construction costs
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Chapter 3 Part 1 of 3 1) Identify and describe the two major sources of current liabilities. The two major source of liabilities‚ for both current and noncurrent liabilities‚ are operating and financing activities. Current liabilities of an operating nature—such as accounts payable and operating expense accruals—represent claims on resources from operating activities. Current liabilities such as notes payable‚ bonds‚ and the current maturities of long-term debt reflect claims on resources from financing
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of the research done on the lease and lease structures in the FASB codification as required by the supervisor in response to the request of a client. The client is a regional trucking company and currently owns 100 trailers which is 20 less than what is required to take up a new job that has been offered to the company. Though the new opportunity promise growth‚ the uncertainty on the duration of the work is confusing and the client needs advice whether to buy or lease the extra trailers required
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