The lessor’s gross and net investment in the lease The lease has the same facts as described in, i.e. the asset has a fair value of €10,000, the lessee is making five annual rentals payable in advance of €2,100 and the total unguaranteed estimated residual value at the end of five years is estimated to be €1,000. The lessor’s direct costs have been excluded for […]

A lease structured such that the most likely outcome is that the lessee has no significant residual risk Brief details of a motor vehicle lease are: Fair value – €10,000 Rentals – 20 monthly payments @ €300, followed by a final rental of €2,000 At the end of the lease, the lessee sells vehicle as agent for the lessor and if sold for: (i) more […]

Rental rebates The lease arrangements are as in, except that at end of the lease, the lessee sells the vehicle as agent for the lessor, and if it is sold for (i) up to £3,000, the guaranteed residual value, all of the proceeds are received by the lessor; or (ii) more than £3,000, 99% of excess is repaid to the lessee. The lessee does not […]

Early termination of finance leases by lessees In in above there is effectively a guarantee of a residual of €3,000 dependent on the mileage done by the leased vehicle. Assuming that the lease is capitalised as a finance lease, if the lessee considers at the lease inception that the guarantee will not be called on, then he will depreciate the vehicle to an estimated residual […]

An entity agrees to enter into a new lease arrangement with a new lessor. As an incentive for entering into the new lease, the lessor agrees to pay the lessee’s relocation costs. The lessee’s moving costs are €1,000. The new lease has a term of 10 years, at a fixed rate of €2,000 per year. The lessee recognises relocation costs of €1,000 as an expense […]

Sale and finance leaseback – accounting for the excess sale proceeds An asset that has a carrying value of €700 and a remaining useful life of 7 years is sold for €1,200 and leased back on a finance lease. This is accounted for as a disposal of the original asset and the acquisition of an asset under a finance lease for €1,200. The excess of […]

Tran Corporation is authorized to issue both preferred and common stock. The par value of the preferred is $50. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock. Feb. 1 Issued 20,000 shares for cash at $53 per share. July 1 Issued 12,000 shares for cash at $57 per share. Instructions (a)Journalize the transactions. (b)Post […]

Sale and leaseback transaction involving escalating rentals and call options Company S sells a property to Company B for £100,000,000 and leases it back on the following terms: Rental for years 1 to 5 £3,900,000 per annum Rental for years 6 to 10 £5,875,000 per annum Rental for years 11 to 15 £8,830,000 per annum Rental for years 16 to 20 £13,280,000 per annum Rental […]

Assume that Bank A receives a primary deposit of $100,000 and that it must keep reserves of 10 percent against deposits. Prepare a simple balance sheet of assets and liabilities for the bank immediately after the deposit is received. Assume Bank A makes a loan in the amount that can be “safely lent.” Show what the bank”s balance sheet of assets and liabilities would look […]

Government grant by way of forgivable loan An entity participates in a government sponsored research and development programme under which it is entitled to receive a government grant of up to 50% of the costs incurred for a particular project. The government grant is interest-bearing and fully repayable based on a percentage (‘royalty’) of the sales revenue of any products developed. Although the repayment period […]