Acc541 Trucking Memo

Response to Client James P. Jacobs ACC/541 September 19, 2011 Shauki Smith inventory: Financial go| To:| Trucking Client| From:| James P. Jacobs| CC:| | Date:| 9/19/2011| Subject:| Trailer Leasing Options| | | The pursuance summary provides knowledge and recommendations for the leasing of twenty additional trailers to provide spread out services. The primary root system of information will be the Financial Accounting Standards posting (FASB). Several types of prosecutes are in stock(predicate) including direct financing, gross sales type, and operate term of a contract. Capital Lease: The FASB classifies this type of ask as single that is accounted for by the lessee as a purchase and by the lessor as financing or a sale. Four criteria have been know: 1. The lessor transfers ownership to the lessee at the end of the employ term; 2. The lease contains an option to purchase the asset at a jam price; 3. The lease term is equal to 75 % or more of the estimated economic life of the office (exceptions for utilise belongings leased toward the end of its useful life); or 4. The present look back of minimum lease letting payments is equal to 90 % or more of the fair market value of the leased asset less related investment tax credits well-kept by the lessor (FASB ASC 840-10-25-1). Direct Financing Lease: This type of lease meets the criteria for a pileus lease. In addition the lessor does not determine a profit. Because this is considered a sale the payments from the lessee are not considered lease payment but instead are installment payments on the purchase. The one-yearly accrued interest is also recorded. For the lessee this type of nifty lease directs the recording at present value (PV) of annual lease payment. Because it is considered a purchase depreciation will be recorded. If the PV is higher than fair market value (FMV), FMV should be apply to record (Putra, 2008). T he Sales Type Lease: Manufacturers and deale! rs use sales type...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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