ACC 541 Week 3: Memorandum: Client Lease

Good Essays
ACC/541
Thomas Gurber
Client Request
Week 3
January 13, 2014

Cayce Harris

Memorandum

To: Supervisor CC: Client From: Cayce Harris Date: 1/13/2014 Re: Client Request

As requested, the following information was pulled directly from the FASB’s website in regards to Direct Financing leases and Sales-Type leases from a lessors prospective. The following describes what the lessor is responsible for when entering into and obtaining each type of lease. In order for the lessor to establish the lease as one of the above, the lease must meet one of the four criteria that determine the lease as a capital leases for the lessee.

Gross Investment in a Sales-Type Lease or Direct Financing Lease
30-6
…show more content…
The minimum lease payments net of amounts, if any, included therein with respect to executory costs (such as maintenance, taxes, and insurance to be paid by the lessor) including any profit thereon

• b. The unguaranteed residual value accruing to the benefit of the lessor. The estimated residual value used to compute this amount shall not exceed the amount estimated at lease inception except as provided in paragraph 840-30-30-7.

Sales-Type Leases

30-8 The lessor 's net investment in a sales-type lease shall consist of the gross investment (as measured in paragraph 840-30-30-6) minus the unearned income.

30-9 The lessor shall measure unearned income initially as the difference between the gross investment in the sales-type lease and the sum of the present values of the two components of the gross investment. The discount rate to be used in determining the present values shall be the interest rate implicit in the sales-type lease.

30-10 The present value of the minimum lease payments (net of executory costs, including any profit thereon), computed at the interest rate implicit in the lease, shall be recorded by the lessor as the sales price.

Direct Financing

You May Also Find These Documents Helpful

  • Good Essays

    Home Reading Report

    • 514 Words
    • 3 Pages

    3. Upon signing of this contract, the LESSEE shall pay the LESSOR the sum of…

    • 514 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Manufactured Homes Inc

    • 359 Words
    • 2 Pages

    Sales are recognized when the customer makes the down payment (Around 10%) and enters an installment contract.…

    • 359 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Dsfd

    • 1882 Words
    • 8 Pages

    (1) Interest income is accrued over the period of the loan / investment and net of amortisation of premium /…

    • 1882 Words
    • 8 Pages
    Good Essays
  • Satisfactory Essays

    Accounting Is and Bs

    • 493 Words
    • 2 Pages

    The prepaid insurance relates to a 12-months insurance policy that was taken out on 01 November 2012. The prepaid rent relates to the monthly rent on Artful Antiques' retail outlet in Flemington, which is paid in advance on the 15'" of each month. Depreciation for the year ended 31 March 2013 has not been recorded for the equipment which is being depreciated using the straight-line method over 10 years (wrth zero residual value), nor for the vehicle which is being depreciated at 10% per annum using the reducing balance method. The sales figure includes an amount of $6,000 that was received in advance for goods due to be delivered in April 2013.…

    • 493 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    (iii) A reasonable allowance for rentals and/or other payments which are required as a condition for the continued use or possession, for purposes of the trade, business or profession, of property to which the taxpayer has not taken or is not taking title or in which he has no equity other than that of a lessee, user or possessor;…

    • 23539 Words
    • 95 Pages
    Powerful Essays
  • Powerful Essays

    CONTENTS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 11. 14. Introduction Related provisions Interpretation Letting of real property as a business source Letting of real property as a non-business source Commencement date of letting of property All real properties grouped as a single source Expense relating to income of letting of real property Rental income received in advance Capital allowance Industrial building allowance Replacement cost of furnishings Letting of part of building used in the business Effective Date…

    • 8952 Words
    • 36 Pages
    Powerful Essays
  • Better Essays

    e) the extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and…

    • 1105 Words
    • 5 Pages
    Better Essays
  • Good Essays

    Income Tax

    • 110773 Words
    • 444 Pages

    (c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :…

    • 110773 Words
    • 444 Pages
    Good Essays
  • Satisfactory Essays

    Gdp and Growth

    • 319 Words
    • 2 Pages

    2. Gross Investment – purchase of new plants, equipment, buildings, residences and net worth of inventories.…

    • 319 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Net realisable value is the estimated selling price in the ordinary course of business less…

    • 381 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Case 08-4 Minimum

    • 1390 Words
    • 4 Pages

    According to ASC 840-10-25-5, it says “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:…

    • 1390 Words
    • 4 Pages
    Powerful Essays
  • Satisfactory Essays

    First of all, with an operating lease, the payments received by the lessor are usually…

    • 565 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Case 11 6 Lessee Ltd

    • 672 Words
    • 2 Pages

    The second question in this case is if the senior accountant’s analysis was correct. From the paragraph above, this lease should be classified as a finance lease. The senior accountant correctly classified this lease as a finance lease. However, the senior accountant did not use the correct discount rate for the present value calculation of the minimum payments. IAS 17.20 says that the payments should be “discounted…

    • 672 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Lessee Ltd.- Lease Case

    • 954 Words
    • 4 Pages

    According to IAS 17-10(d), a lease must be classified as a finance if either “the lease term is for the major portion of the asset’s economic life” or “at the inception of the lease the present value of the minimum payment amounts to at least substantially all of the fair value of the lease asset.” With regards to this case, the term of the lease is equal to 75% of the equipment’s useful life. Also, the present value of the annual payments would equal $263,716 with the fair value of asset only being $265,000, which makes the present value of the minimum lease payment 99.5% of the fair value of the leased asset. With these criteria being met it satisfies the requirements of IAS 17 and would therefore be classified as a finance lease…

    • 954 Words
    • 4 Pages
    Good Essays
  • Better Essays

    Case 9-4

    • 1781 Words
    • 8 Pages

    How should NeedsSpace account for the two obligations noted as provisions in the lease agreement?…

    • 1781 Words
    • 8 Pages
    Better Essays