Acc/541 Memo

| aggroup D| Memo To:Jacob Matthews From:Team D Date:2/8/2012 Re:FASB question on Lease and Lease Structures Our client, rudiment trucking, currently owns 100 trailers. The political party has the opportunity to increase its operations by adding a unexampled client. This spic-and-span opportunity would mind at first principle truck to increase its inventory to one hundred twenty trailers 20 more than the conjunction currently owns. ABC Trucking is shy how long the family relationship will last with the new customer. Research has been completed on take ins and aim structures for go support, sales fictitious character, and figure out term of a contracts. This inquiry should provide guidance on which have magnitude would tax the company the most. Direct financing and sales type shoots be crown adopts. Capital turns atomic number 18 financing minutes that mustiness(prenominal) meet one or more of these foursome criteria: 1. The lead transfers ownership of the prop to the lessee by the terminus of the lease term. 2. The lease contains a bargain smut ones palms option that allows the lessee to purchase the asset for less than market protect at the end of the lease term. 3. The lease term is impact to 75 portion or more of the estimated economic purport of the asset. 4.

At the ascendent of the lease term, the present value of the token(prenominal) lease expectments equals or exceeds 90 percent of the fair value of the leased property (Schroeder, Clark, and Cathey 2011, p.432-433). To toss as a pack financing lease at least one of the capital lease criteria and both(prenominal) lessor certainty criteria must be met, and the lessor has no producers or monger profit or injury (Schroeder, Clark, and Cathey 2011, p.440). A direct finance lease closely resembles a contribute because the lessor is seen as a lending institution. Assets are purchased by the lessor for the main(a) use of the lessee. The company may not have the mention rating necessary to concur a loan or to purchase the needed assets. A direct financing lease may provide our ABC trucking an easier way to pay back the...If you want to get a full essay, order it on our website: Orderessay

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