plan to lease an office building with lease to own option. I think this one is the best option for the business people who need a building for long year. A bargain purchase option is a provision in the lease contract that gives the lessee (Purchaser) the option of purchasing the leased property at a bargain price. This option gives you the right but not the obligation to purchase the office building and the land that the building sits on. In addition, a lessee should classify a lease transaction
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Part 2 According to AASB 117, a lease is defined as “an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time” (Certified Public Accountant Australia [CPA], 2009). Leasing is potentially advantageous to organizations in terms of maintaining effective asset management (Noland, 2006). For instance, due to changes in the dynamic business environment organizations are able to replace leased assets more
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classify the lease through AASB 117 par 10-12: In order for the lease to be deemed as a financial lease, based on professional judgement it is deem necessary for at least two of the required standards set in either AASB 117 par 10 or par 11. AASB 117 par 10: a) Ballarat Ltd does not intend to buy the bulldozer at the end of the lease term, thus there would be no transfer of ownership of asset and the ownership of the asset will return back to Monash Ltd at the end of the lease term. (NO)
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Intermediate Accounting II Study Guide Final Exam 1. Liabilities are a. any accounts having credit balances after closing entries are made. b. deferred credits that are recognized and measured in conformity with generally accepted accounting principles. c. obligations to transfer ownership shares to other entities in the future. d. obligations arising from past transactions and payable in assets or services in the future. 2. Which of the following is a characteristic
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Accounting for Lease Agreements Background NeedsSpace have entered into a leasing agreement with WeHaveIt to rent space for its corporate offices. Certain provisions have been included within the lease that Needs Space must take into consideration. ASC 840 has defined this lease as an operating lease. Key Facts The lease agreed upon is a 10-year term lease with no option to renew. Furthermore, there is no ability to negotiate for renewal. The following provisions are included in the lease agreement:
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unamortized discount. Only capital leases are included in the company’s liabilities, operating leases are not. Capital leases are recorded at the present value of the periodic lease payments discounted at the lessee’s cost of capital or the lessor’s implicit rate, if known by the lessee, whichever is lower. Subsequently, the capital lease reported in the balance sheet at the end of each reporting period is the net of principal payment component of the lease payment. Mortgage payables are reported
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Case 9-4 How should NeedsSpace account for the two obligations noted as provisions in the lease agreement? ● Provision 1: “Lessor may require the lessee to perform general repairs and maintenance on the leased premises.” By entering the lease agreement, NeedsSpace (the lessee) becomes legally and contractually responsible for performing general repair and maintenance on the leased premises. Assuming that the lessee is required to make deposits to financially protect the lessor concerning
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into a capital lease agreement. When a lease agreement is a capital lease agreement a company must capitalize the lease. “It records an asset and a liability generally equal to the present value of the rental payments.” (Kieso et al, 2007, p. 1022). In order for a lease to be considered a capital lease it must meet at least one of the four following criteria: The lease transfers ownership of the property to the lessee. The lease contains a bargain purchase option. The lease term is equal to
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DETERMINE SEC CONSIDERATIONS), AND AN INTRODUCTION TO THE OVERALL QUESTION BEING ADDRESSED ABC Company is a publicly held alternative energy firm that develops and leases solar panel technology to residential, government and commercial markets. As of December 31st, 2011, ABC Company recognized $X billion in revenue for the sale, lease and installation of photovoltaic solar systems. Customers have the choice of either purchasing or leasing ABC’s solar panels. ABC Company is currently involved in
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A finance lease or capital lease is a type of lease. It is a commercial arrangement where: the lessee (customer or borrower) will select an asset (equipment, vehicle, software); the lessor (finance company) will purchase that asset; the lessee will have use of that asset during the lease; the lessee will pay a series of rentals or installments for the use of that asset; the lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid by the lessee; the
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