On January 1, 2020, Perriman Company transferred equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment. The term of the lease is 8 years. Instructions a. What is the major issue related to sale-leaseback accounting? b. 1. How should Perriman account for the sale portion of the sale-leaseback transaction at January 1, 2020? 2. How should Perriman account for the leaseback portion of the sale-leaseback transaction at January 1, 2020?

On January 1, 2020, Perriman Company transferred equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment. The term of the lease is 8 years. Instructions a. What is the major issue related to sale-leaseback accounting? b. 1. How should Perriman account for the sale portion of the sale-leaseback transaction at January 1, 2020? 2. How should Perriman account for the leaseback portion of the sale-leaseback transaction at January 1, 2020?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 37P

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Instructions

a. What is the major issue related to sale-leaseback accounting?

1. How should Perriman account for the sale portion of the sale-leaseback transaction at January 1, 2020?
2. How should Perriman account for the leaseback portion of the sale-leaseback transaction at January 1, 2020?

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