StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Intermediate Accounting 2 answeres - Essay Example

Cite this document
Summary
This is because leases allow any company to adjust to changes in technology and capacity needs without necessarily having to make a large capital commitment.
The members of TopNotch…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.2% of users find it useful
Intermediate Accounting 2 answeres
Read Text Preview

Extract of sample "Intermediate Accounting 2 answeres"

Download file to see previous pages

(Maxwel, 2010) The lease receivable will be revealed as an asset on the balance sheet, and the interest revenue is recognized over the term of the lease, as paid. Normally, the company will record its sale on its books, removing the asset from its books and replacing it with a receivable from the lease. During the lease term, the lessor receives interest income. The cash inflow equals the lease payments and the cash outflow is equal to the book value of the asset. (Paul, 2007) Legally, the lease expenses are usually treated as operating expense and the operating lease is not revealed as part of the capital of the firm.

When a lease is classified as a sales type lease, the present value of the lease expenses is treated as debt, and interest is imputed on this amount and shown as part of the income statement. Changing from operating leases to sales type leases increases the debt shown on the balance sheet significantly. (Paul, 2007).It is therefore wise for the company to use operating lease since there would be no increase in debt. The operating lease payments in future years, which are revealed in the footnotes to the financial statements for US firms, should be discounted back at a rate that should reflect their status as unsecured and fairly risky debt.

As an approximation, using the firm’s current pre-tax cost of debt as the discount rate yields a good estimate of the value of operating leases. Note that capital leases are accounted for similarly in financial statements, but the significant difference is that the present value of capital lease payments is computed using the cost of debt at the time of the capital lease commitment, and is not adjusted as market rates change. Using straight line method Depreciation = (Cost - Residual value) / Useful life/salvage value.

Suppose the cost of airplane is p, then the salvage value of x and y under 15 and 25 years

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Intermediate Accounting 2 answeres Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Intermediate Accounting 2 answeres Essay Example | Topics and Well Written Essays - 1000 words. Retrieved from https://studentshare.org/finance-accounting/1674493-intermediate-accounting-2-answeres
(Intermediate Accounting 2 Answeres Essay Example | Topics and Well Written Essays - 1000 Words)
Intermediate Accounting 2 Answeres Essay Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/finance-accounting/1674493-intermediate-accounting-2-answeres.
“Intermediate Accounting 2 Answeres Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/finance-accounting/1674493-intermediate-accounting-2-answeres.
  • Cited: 0 times

CHECK THESE SAMPLES OF Intermediate Accounting 2 answeres

The Significant Role of Financial Intermediaries

This paper "The Significant Role of Financial Intermediaries" focuses on the fact that financial intermediaries are middlemen that smooth the flow of funds between savings surplus units (SSUs) and deficit spending units (DFUs), and includes commercial banks, mutual savings banks.... nbsp;… In order to manage the economy's money supply, the central bank buys and sells Treasury securities – consisting of a) Treasury bills with maturity of up to one year, b) Treasury notes with maturities of from 2 years to 10 years, and c) Treasury bonds, with maturities from 11 to 30 years....
8 Pages (2000 words) Essay

Explaining Basic Accounting Concepts and Business Structures

intermediate accounting.... Generally accepted accounting principles (GAAP) are common set of standards and principles established by an authorized body tasked with designing rules encompassing organizations in a given location and over a specified period of time.... The standards and principles should be… ersal in nature and must be applicable for businesses in the United States; otherwise each and every business enterprise would design their unique set of standards making it difficult for a governing bodies and readers of financial statements to monitor and evaluate adherence Basic accounting Concepts and Business Structures The objectives of the essay are to provide appropriate answers to the following: Topic 1: Identify and describe the sources of generally accepted accounting principles....
2 Pages (500 words) Essay

The Impact of Lobbying on Standard Setting in Accounting

Standard setting is the enactment or improvement of accounting standards for financial reporting.... These enacted or improved accounting standards are used guidelines in the preparation of the financial statements (Rezaee and Riley 2009: 274).... What the institutions are involved in standard setting in accounting?... Two institutions must come together to have the accounting standards set or financial reporting standards accomplish the latter's purpose....
9 Pages (2250 words) Essay

Accounting Technologies in Today's Life

This paper seeks to discuss the role of accounting in the society in the light of developments of accountancy from being frequently portrayed as boring, dull and grey in popular culture accountancy to having accounting technologies as central to contemporary life.... It is also… Moreover, accounting expertise is also implicated in the transformation of capitalism as organizations seek to avoid taxes, dilute As to whether these developments are a way to signalling how much further accounting research is needed to develop in addressing such factors, is a question that will have to be answered in this paper....
9 Pages (2250 words) Essay

International Business in UK

 This paper discusses the potential costs and opportunities for UK based organizations in outsourcing their operations to nations in the enlarged EU.... he companies based in the UK have various strategic options available to them in light of the latest developments in the European economies....
8 Pages (2000 words) Essay

Financial Statement Analysis of Tesco as a Limited Company

Using published annual reports for the past three years, this paper seeks to evaluate the financial statements of Tesco for the past four years as to its financial performance in its income statement, liquidity, operating cycle and management of working capital, and its… The analysis using appropriate ratios will be undertaken in the light of the general and economic and industry specific contexts....
9 Pages (2250 words) Essay

Abbeycrest and Delta as a Leading Businesses and Recognized All over the World

They operate in almost every industry (John, 2008).... Report shows that both Abbeycrest and Delta provide services that are highly specialized to all types of businesses especially those within their… According to William C.... Gale, the senior researcher at the finance and chief financial officer of Delta, the Corporation went public in the year 1983. The corporation had opened close to twenty three thousand restaurants in one hundred and ten countries making it This amplified the revenues to 1....
8 Pages (2000 words) Essay

Global Financial Management

intermediate accounting (5th ed.... intermediate accounting (14th ed.... intermediate accounting (14th ed.... 1) Drawing time line for [1] a $100 lump sum cash flow at the end of the year.... 2] an ordinary annuity of $100per year for 3years , [3]an even cash flow stream of -$50, $100, $75 and $50 at the end of years 0 through 3. 2) We sometimes need to find how long it will take a sum of… For example, if a company's sales at a rate of 20% per year, how long will it take sales to double? (2) Will the future value be larger or smaller if we compounded an initial 1) Drawing time line for a $100 lump sum cash flow at the end of the year....
2 Pages (500 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us