The lease agreements are commonly of two types- Financial lease agreement and Operating lease agreement Financial lease agreement is a lease agreement or a way of providing finance. In this type of lease legal owner is the finance company for the duration of the lease and on the other hand lessee has operating control as well as substantial share of risk and return. But in operating lease all risk and reward are not transferred to the lessee with the asset transfer. We have to determine in the three cases whether they are finance lease or operating lease.

Question

Martin Hughes earns net self-employment income of $157,100. He works a second job from which he receives FICA taxable earnings of $127,600.Self-Employment tax =

Answer 1

Question

Chapter 14, Problem 20E

To determine

Concept Introduction:

The lease agreements are commonly of two types-

Financial lease agreement and

Operating lease agreement

Financial lease agreement is a lease agreement or a way of providing finance. In this type of lease legal owner is the finance company for the duration of the lease and on the other hand lessee has operating control as well as substantial share of risk and return.

But in operating lease all risk and reward are not transferred to the lessee with the asset transfer.

We have to determine in the three cases whether they are finance lease or operating lease.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

Martin Hughes earns net self-employment income of $157,100. He works a second job from which he receives FICA taxable earnings of $127,600.Self-Employment tax =

Q2: During the current year, Fortini Company disposed of three different assets. The company’s accounts reflected the following on January 1 of the current years, prior to the disposal of the assets: Asset Original Cost Residual Value Estimated Life Accumulated Depreciation (straight line) Machine A$21k3k8 yr$15750 (7 years) Machine B50k4k10 yr36.8k (8 years) Machine C75k3k12 yr60k (10 years) The machines were disposed of in the following ways: Machine A: Sold on January 1 of the current year for $5,000 cash. Machine B: Sold on April 1 for $10,500; received cash, $2,500, and a note receivable for $8,000, due on March 31 of the following year, plus 6 percent interest. Machine C: Suffered irreparable damage from an accident on July 2. On July 10, a salvage company removed the machine at no cost. The machine was insured, and $18,000 cash was collected from the insurance company. Required: 1. Prepare all journal…

Question 2 U. Richards does not keep his books on the double entry system. His bank summary amount for 2010 is as follows: Balance 1.1.2010 1890 Receipts from $44656 debtors Creditors Loan from U. Miller $2.000 Rates Rent Drawings Cash withdrawn from bank $540 0 Payment to Trade $316 95 2750 1316 3095 1642 Sundry Expense Records of cash paid were sundry $122, trade creditors $642. Cash sales amounted to cash drawings were $5289. The following information is also available: 31.12.201 31.12.2 0 011 Cash in hand $48 $93 Trade creditors $4896 $5091 Accounts Receivables 60 $71 13 32 Rent Owing $250 Rates in Advance $282 $312 Motor van (at valuation) 2800 2400 Stock 11163 13021 Required: A. Statement of Affairs. (to find opening capital as at 31.12.2010) B. Cash Account & Bank Account. C. Accounts Receivables & Accounts Payables Control A/Cs. D. Income Statement for the year ended 31 December 2011.