On January 1, 2015, Perriman Company sold equipment for cash and leased it back. As seller-lessee, Perriman

Question:

On January 1, 2015, Perriman Company sold equipment for cash and leased it back. As seller-lessee, Perriman retained the right to substantially all of the remaining use of the equipment.

The term of the lease is 8 years. There is a gain on the sale portion of the transaction. The lease portion of the transaction is classified appropriately as a finance lease.

Instructions

(a) What is the theoretical basis for requiring lessees to capitalize certain long-term leases? Do not discuss the specific criteria for classifying a lease as a finance lease.

(b) (1) How should Perriman account for the sale portion of the sale-leaseback transaction at January 1, 2015?

(2) How should Perriman account for the leaseback portion of the sale-leaseback transaction at January 1, 2015?

(c) How should Perriman account for the gain on the sale portion of the sale-leaseback transaction during the first year of the lease? Why?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 66% (3 reviews)

a The theoretical basis for requiring lessees to capitalize certain longterm leases lies in the principle of substance over form Essentially when a le...View the full answer

Answered By

Umber Talat

I am providing full time mentoring and tutoring services in Business Finance, Contemporary issue in Global Economy, Quantitative Techniques, Principles of Marketing, strategic marketing, International Marketing, Organizational Behavior (OB), Consumer Behavior, Sales Force Management, Strategic Brand Management, Services Marketing, Integrated Marketing Communication (IMC), Principles of Management, General Management, Strategic Management, Small and Medium Enterprise Management, Innovation Management, Change Management, Knowledge Management, Strategic Planning, Operations Management, Supply Chain Management, Logistics Management, Inventory management, Total Quality Management (TQM), Productions Management, Project Management, Production Planning, Human Resource Management (HRM), Human Resource Development, Strategic HRM, Organizational Planning, Performance and Compensation Management, Recruitment and Selection, Organizational Development, Global Issues in Human Resource Management, Retail Marketing, Entrepreneurship, Entrepreneurial Marketing, International Business, Research Methods in Business, Business Communication, Business Ethics.

4.70+ 158+ Reviews 236+ Question Solved

Related Book For book-img-for-question

Intermediate Accounting IFRS Edition

ISBN: 9781118443965

2nd Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

See More Books

Question Posted: Mar 23, 2024 08:03 AM

See More Questions

On January 1, 2015, Perriman Company sold equipment for cash and leased it back. As seller-lessee, Perriman

Question:

Step by Step Answer:

a The theoretical basis for requiring lessees to capitalize certain longterm leases lies in the principle of substance over form Essentially when a le...View the full answer

Intermediate Accounting IFRS Edition

Students also viewed these Business questions