Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On 1 January 2 0 0 8 , Joyful Limited entered into an agreement to lease a machine for general use in the business. The
On January Joyful Limited entered into an agreement to lease a machine for general use in the business. The agreement, which may not be terminated by either party to it runs for seven years and provides for Joyful Limited to make an annual rental payment of $ on December each year. The cost of the machine to the lessor was $ and has no residual value. There is no presumption that the lease will be extended. The machine has a useful economic life of eight years and Joyful Limited depreciates its property, plant and equipment using the straightline method.
The lessor has suggested that the lease could be drawn up with a minimum payment period of one year and an option to renew or purchase. The lessor alleges that this would mean the lease could be kept off balance sheet Please discuss the rationale underlying this suggestion
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started