Bam Year 2

1. We see you have another new lease this year for additional shop equipment. You booked this lease as a long-term liability, so we need the same information for this lease as we asked for on the lease for the building. We need the lease term, the interest rate, the fair value of the assets leased, and the useful life of the assets.

Issue(s): The issue is Hydroqual booked the leases as a long term liability, but they are not disclosing all of the needed information to determine the correct accounting treatments, therefore they need to give us more information on the matter. The company has also not told us if it is a capital or operating lease. Hydroqual stated yes, Kay negotiated that lease. We are paying an annual lease payment of $3,765 for three years. If we had purchased that equipment it would have cost us well over $20,000 and we certainly wouldve been able to use it for seven years or more. However, we did not want to purchase items that we may not need over the long term depending on the direction. The business goes over the next few years they did not give me an interest rate, but I do know that the total principal amount due on the lease over the three years is $10,750. We will be returning the assets to the lessor at the end of the lease.

1. Analysis: Apply the facts of the case study to the rule and provide an in-depth analysis based on the issue. Your analysis should also include supporting schedules, calculations, and/or correcting journal entries.
2. Conclusion: State your conclusion(s) based on the results of your analysis and indicate any changes to the financial statements and disclosure notes resulting from the rule.

What is the Analysis and conclusion?