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Lease Accounting Analysis Guide

This document outlines the terms of a lease agreement between Bunker Company and Gilbreth Company. The 3-year lease begins on January 1, 2017 with annual payments of $7,500 payable at the end of each year. The asset's cost and fair value are $23,000, and its economic life is 4 years. The lessee's borrowing rate is 9%. The document asks for analysis of whether this is an operating or capital lease under ASC 840, preparation of an amortization table and journal entries for the first two years, and comparison of financial statement effects if the asset's useful life was 6 years instead of 4.

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trilocksp Singh
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97 views1 page

Lease Accounting Analysis Guide

This document outlines the terms of a lease agreement between Bunker Company and Gilbreth Company. The 3-year lease begins on January 1, 2017 with annual payments of $7,500 payable at the end of each year. The asset's cost and fair value are $23,000, and its economic life is 4 years. The lessee's borrowing rate is 9%. The document asks for analysis of whether this is an operating or capital lease under ASC 840, preparation of an amortization table and journal entries for the first two years, and comparison of financial statement effects if the asset's useful life was 6 years instead of 4.

Uploaded by

trilocksp Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Bunker Company negotiated a lease with Gilbreth

Company that begins


Bunker Company negotiated a lease with Gilbreth Company that begins

Bunker Company negotiated a lease with Gilbreth Company that begins on January 1, 2017.
The lease term is three years, and the asset's economic life is four years. The annual lease
payments are $7,500, payable at the end of the year. The cost and fair value of the asset are
$23,000. The lessee's cost of borrowing is 9%. Bunker accounts for leases under ASC 840.

Required:
1. Determine whether Bunker must treat this lease as an operating lease or a capital lease.
2. Prepare an amortization table for the lease.
3. Prepare Bunker's journal entries for the first two years of the lease.
4. Assume that all facts remain the same except that the asset's useful life is six years. Is this
an operating lease or a capital lease? Prepare journal entries for the first two years of the lease.
5. Compare the financial statement effects of the lease treatment you selected in requirement 3
with the financial statement effects of the treatment you selected in requirement 4. Specifically,
compare the effects on assets, liabilities, and equity under the two alternative sets of
assumptions as of December 31, 2017, immediately after the first lease payment is made.

Bunker Company negotiated a lease with Gilbreth Company that begins


SOLUTION-- http://solutiondone.online/downloads/bunker-company-negotiated-a-lease-with-
gilbreth-company-that-begins/

Unlock answers here solutiondone.online

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