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’. Capital lease: This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized. Sale-Leaseback approach: In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset. Memo From: Person M Controller GT Company To: Person EF CFO GT Company Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like: 1. The Sale -lease back transaction 2. Gain or loss from sale of lease 3. Lease back 4. Capitalizing long term leases on the conceptual basis.

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Answer 1

Question

Chapter 15, Problem 15.7BYP

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’.

Capital lease:

This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized.

Sale-Leaseback approach:

In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset.

Memo

From:

Person M

Controller

GT Company

To:

Person EF

CFO

GT Company

Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like:

1. The Sale -lease back transaction

2. Gain or loss from sale of lease

3. Lease back

4. Capitalizing long term leases on the conceptual basis.

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Answer 2

Question

Chapter 15, Problem 15.7BYP

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’.

Capital lease:

This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized.

Sale-Leaseback approach:

In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset.

Memo

From:

Person M

Controller

GT Company

To:

Person EF

CFO

GT Company

Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like:

1. The Sale -lease back transaction

2. Gain or loss from sale of lease

3. Lease back

4. Capitalizing long term leases on the conceptual basis.

Expert Solution & Answer

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Answer 3

Question

Chapter 15, Problem 15.7BYP

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’.

Capital lease:

This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized.

Sale-Leaseback approach:

In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset.

Memo

From:

Person M

Controller

GT Company

To:

Person EF

CFO

GT Company

Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like:

1. The Sale -lease back transaction

2. Gain or loss from sale of lease

3. Lease back

4. Capitalizing long term leases on the conceptual basis.

Expert Solution & Answer

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Answer 4

Question

Chapter 15, Problem 15.7BYP

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’.

Capital lease:

This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized.

Sale-Leaseback approach:

In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset.

Memo

From:

Person M

Controller

GT Company

To:

Person EF

CFO

GT Company

Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like:

1. The Sale -lease back transaction

2. Gain or loss from sale of lease

3. Lease back

4. Capitalizing long term leases on the conceptual basis.

Expert Solution & Answer

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Answer 5

Chapter 15, Problem 15.7BYP

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’.

Capital lease:

This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized.

Sale-Leaseback approach:

In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset.

Memo

From:

Person M

Controller

GT Company

To:

Person EF

CFO

GT Company

Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like:

1. The Sale -lease back transaction

2. Gain or loss from sale of lease

3. Lease back

4. Capitalizing long term leases on the conceptual basis.

Answer 6

Chapter 15, Problem 15.7BYP

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’.

Capital lease:

This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized.

Sale-Leaseback approach:

In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset.

Memo

From:

Person M

Controller

GT Company

To:

Person EF

CFO

GT Company

Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like:

1. The Sale -lease back transaction

2. Gain or loss from sale of lease

3. Lease back

4. Capitalizing long term leases on the conceptual basis.

Answer 7

Chapter 15, Problem 15.7BYP

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’.

Capital lease:

This type of lease is a situation whereby the lessor (owner) transfers the ownership of leased asset to the lessee (user) on the maturity period of terms of lease. This is non cancellable in nature and it extends to long term and can also be capitalized.

Sale-Leaseback approach:

In the sale-leaseback approach, the owner of the leased asset sells it and immediately leases it back from the new owner. In this transaction, seller (lessee) receives cash from the sale of the asset and also pays periodic rent payments to the buyer (Lessor) to retain the use of asset.

Memo

From:

Person M

Controller

GT Company

To:

Person EF

CFO

GT Company

Subject: To write a memo to the company CFO regarding the accounting for sales transaction of capital lease like:

1. The Sale -lease back transaction

2. Gain or loss from sale of lease

3. Lease back

4. Capitalizing long term leases on the conceptual basis.

Answer 8

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Answer 9

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Answer 10

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Answer 11

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