ABC sells an asset with a FMV of $1,000,000 to XYZ and immediately leases back the asset. Asset has book value to ABC of $900,000 (original cost of 1,200,000). Sales price was $1,000,000 and occurred on January 1, 2018, Lease term is 10 years and asset has remaining useful life of 15 years. Present value of lease payments is $800,000, Implicit rate is known by Lessee, Asset residual value is expected to be $300,000 and none of the residual value is guaranteed by the Lessee, Based on these facts O ABC will recognize gain on the sale of the asset and recognize an operating lease for the lease-back of the asset. CRABC will account for this as a borrowing transaction. XYZ will account for this as a lending transaction KD Both b and c. QUESTION 23 ABC sells an asset with a FMV of $1,000,000 to XYZ and immediately leases back the asset. Asset has book value to ABC of $900,000 (original cost of 1,200,000). Sales price was $1,000,000 and occurred on January 1, 2018. Lease term is 12 years and asset has remaining useful life of 12 years. Present value of lease payments is $1,000,000. Implicit rate is known by Lessee. Asset residual value is expected to be $0. Based on these facts E ABC will recognize gain on the sale of the asset and recognize an operating lease for the lease-back of the asset. KI ABC will account for this as a borrowing transaction. KIN XYZ will account for this as a lending transaction KBoth b and c.
ABC sells an asset with a FMV of $1,000,000 to XYZ and immediately leases back the asset. Asset has book value to ABC of $900,000 (original cost of 1,200,000). Sales price was $1,000,000 and occurred on January 1, 2018, Lease term is 10 years and asset has remaining useful life of 15 years. Present value of lease payments is $800,000, Implicit rate is known by Lessee, Asset residual value is expected to be $300,000 and none of the residual value is guaranteed by the Lessee, Based on these facts O ABC will recognize gain on the sale of the asset and recognize an operating lease for the lease-back of the asset. CRABC will account for this as a borrowing transaction. XYZ will account for this as a lending transaction KD Both b and c. QUESTION 23 ABC sells an asset with a FMV of $1,000,000 to XYZ and immediately leases back the asset. Asset has book value to ABC of $900,000 (original cost of 1,200,000). Sales price was $1,000,000 and occurred on January 1, 2018. Lease term is 12 years and asset has remaining useful life of 12 years. Present value of lease payments is $1,000,000. Implicit rate is known by Lessee. Asset residual value is expected to be $0. Based on these facts E ABC will recognize gain on the sale of the asset and recognize an operating lease for the lease-back of the asset. KI ABC will account for this as a borrowing transaction. KIN XYZ will account for this as a lending transaction KBoth b and c.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 10GI: Owens Company leased equipment for 4 years at 50,000 a year with an option to renew the lease for 6...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning