Chapter 15, Problem 15.10E

1)

To determine

Lease

Lease is a contractual agreement whereby the right to use an asset for a particular period of time is provided by the owner of the asset to the user of the asset. The owner, who possesses the asset, is termed as ‘Lessor’ and user, to whom the right is transferred to, is termed as ‘Lessee’.

Sales-type lease

Sales type lease is a parallel type of direct financing whereby the owner (lessor) purchases the equipment to lease it and received the interest revenue over the period of lease for equipment, apart from the recognition of profit from sale of equipment.

Present Value:

The value of today’s amount to be paid or received in the future at a compound interest rate is called as present value.

To Determine: the price at which B Incorporation is selling the equipment at June 30, 2016.

(2)

To determine

the amount of receivables related to the lease in the books B Incorporation (lessor) reported in the balance sheet at December 31, 2016

(3)

To determine

the amount related to the lease in the books B Incorporation (lessor) reported in the income statement at December 31, 2016