Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

On January 2, 2011, Grant Corporation leases an asset to Pippin Corporation under the following conditions:

1. Annual lease payments of $10,000 for 20 years.

2. At the end of the lease term the asset is expected to have a value of $2,750.

3. The fair market value of the asset at the inception of the lease is $92,625.

4. The estimated economic life of the lease is 30 years.

5. Grant's implicit interest rate is 12 percent; Pippin's incremental borrowing rate is 10 percent.

6. The asset is recorded in Grant's inventory at $75,000 just prior to the lease transaction.

Required:

a. What type of lease is this for Pippin? Why?

b. Assume Grant capitalizes the lease. What financial statement accounts are affected by this lease, and what is the amount of each effect?

c. Assume Grant uses straight-line depreciation. What are the income statement, balance sheet, and statement of cash flow effects for 2011?

d. How should Grant record this lease? Why? Would any additional information be helpful in making this decision?

e. Assume that Grant treats the lease as a sales-type lease and the residual value is not guaranteed by Pippin. What financial statement accounts are affected on January 2, 2011?

f. Assume instead that Grant records the lease as an operating lease and uses straight-line depreciation. What are the income statement, balance sheet, and statement of cash flow effect on December 31, 2011?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M947992

Have any Question? 


Related Questions in Accounting Basics

Assignmenta manufacturing company is thinking of launching

Assignment A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and m ...

Discussion questions 1 and 2dq 1accounting cyclefinancial

Discussion Questions 1 and 2 DQ #1:Accounting Cycle Financial statements are a product of the accounting cycle. Think about two different companies: a manufacturing company, and a retail company. Why would different comp ...

A tomato farmer with a very large farm of approximately

A tomato farmer with a very large farm of approximately 2200 acres had heard about a new type of rather expensive fertilizer which would supposedly significantly increase his production. The frugal farmer wanted to test ...

Accounting assignmentyour response should be 2-3 pages

Accounting Assignment YOUR RESPONSE SHOULD BE 2-3 PAGES COMPRISING BOTH RESEARCH CASES. Professional Research 1 Your client took accounting a number of years ago and was unaware of comprehensive income reporting. He is n ...

To write a reply post to given answer minimum 350

To write a REPLY POST to GIVEN ANSWER. Minimum 350 words. You can agree or disagree with given answer. It should be your own opinion. Question: Michael Wilson is a new production manager. After a great deal of effort, in ...

The conference on evaluating capital projects has been very

The conference on evaluating capital projects has been very helpful. You have received a significant amount of information and multiple projects to evaluate to hone your skills. To adequately teach Grammy and the board y ...

Kiona co set up a petty cash fund for payments of small

Kiona Co. set up a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in May (the last month of the company's fiscal year). May 1 Prepared a company check for ...

Discussion forumthis week we shall look at monopolistic

DISCUSSION Forum This week we shall look at Monopolistic Competition. This is where you, as a consumer, spend most of your time. In Monopolistic Competition, there are many companies selling similar but not identical pro ...

Accountingbullimagine you are a consultant hired to convert

Accounting • Imagine you are a consultant hired to convert a manual accounting system to an automated system. • Suggest the key advantages and disadvantages of automating a manual accounting system. • Identify the most i ...

International accounting1 when discussing foreign currency

International Accounting 1. When discussing foreign currency exchange, there are several arrangements. List two of these. 2. A _________ is a contract between two or more parties. 3. What are the timelines for the new re ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro