Salaur Company, a risky start-up, is evaluating a lease arrangement being offered by TSP Company for use of a standard computer system. The lease is non-cancelable, and in no case does Salaur receive title to the computers during or at the end of the leas
Salaur
Company, a risky start-up, is evaluating a lease arrangement being
offered by TSP Company for use of a standard computer system. The lease
is non-cancelable, and in no case does Salaur receive title to the
computers during or at the end of the lease term. TSP will lease the
returned computers to other customers. The lease starts on January 1,
2020, with the first rental payment due on January 1, 2020. Additional
information related to the lease and the underlying leased asset is as
follows.
| Yearly rental | $3,057.25 | ||
| Lease term | 3 years | ||
| Estimated economic life | 5 years | ||
| Purchase option | $3,000 at end of 3 years, which approximates fair value | ||
| Renewal option | |||
| Fair value at commencement | $10,000 | ||
| Cost of asset to lessor | $8,000 | ||
| Residual value: | |||
| Guaranteed | –0– | ||
| Unguaranteed | $3,000 | ||
| 12% | |||
| Estimated fair value at end of lease | $3,000 |
Briefly discuss the impact of the accounting for this lease as a finance or operating lease for two common ratios: return on assets and debt to total assets
What fundamental quality of useful information is being addressed when a company like Salaur capitalizes all leases with terms of one year or longer?
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Salaur Company, a risky start-up, is evaluating a lease arrangement being offered by TSP Company for use of a standard computer system. The lease is non-cancelable, and in no case does Salaur receive title to the computers during or at the end of the leas
Salaur Company, a risky start-up, is evaluating a lease arrangement being offered by TSP Company for...
Salaur Company, a risky start-up, is evaluating a lease arrangement being offered by TSP Company for use of a standard computer system. The lease is non-cancelable, and in no case does Salaur receive title to the computers during or at the end of the lease term. TSP will lease the returned computers to other customers. The lease starts on January 1, 2020, with the first rental payment due on January 1, 2020. Additional information related to the lease and the...
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Annual lease payment due at the beginning of
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Bargain purchase option price at end of lease term
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Lease term
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Economic life of leased equipment
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Lessor’s cost
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Fair value of asset at May 1, 2020
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1.
The term of the non-cancelable lease is 6 years with no renewal
option. The equipment has an estimated economic life of 6
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2.
The cost of the asset to the lessor is $240,000. The fair value
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relates to this agreement.
1.
The term of the non-cancelable lease is 3 years with no renewal
option. The equipment has an estimated economic life of 5
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2.
The fair value of the asset at January 1, 2020, is
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The asset will revert to the lessor at the end of the lease
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between Sheridan Leasing Company and Skysong Company, a
lessee.
Commencement date
May 1, 2020
Annual lease payment due at the beginning of
each year, beginning with May 1, 2020
$15,349.90
Bargain purchase option price at end of lease term
$6,000
Lease term
5
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Economic life of leased equipment
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years
Lessor’s cost
$65,000
Fair value of asset at May 1, 2020
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Lessor’s implicit rate
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Lessee’s incremental borrowing...
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1.
The term of the non-cancelable lease is 6 years with no renewal
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2.
The cost of the asset to the lessor is $240,000. The fair value
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The asset will revert to the lessor at the...
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