Draper treatment of the lease

Assignment Help Accounting Basics
Reference no: EM13131815

Draper Corp. leased a new building and land from Baylor Leasing Inc. for 25 years. At the inception of the lease the building and land have fair market values of $200,000 and $25,000, respectively. The building has an expected economic life of 30 years. Which of the following statements is correct regarding Draper's treatment of the lease?

a. Draper should treat the lease as a capital lease even though there is no bargain purchase option and no automatic transfer of ownership at the termination of the lease.

b. Draper should treat the lease as a capital lease only if there is either a bargain purchase option or an automatic transfer of ownership at the termination of the lease.

c. Draper should treat the lease as a capital lease provided that the land and building are recorded in separate asset accounts and accounted for separately.

d. Draper should treat the lease as a capital lease only if Baylor treats the transaction as a leveraged lease.

Reference no: EM13131815

Questions Cloud

Write a suitable mechanism for the cleavage of butyl : Write a suitable mechanism for the cleavage of butyl isopropyl ether with HI at 100 degrees C to form exclusively isopropyl alcohol and 1-iodobutane. Explain why butyl alcohol and 2-iodo-isopropane are not formed in this reaction.
Incentive compensation plan problem : Wright, Inc. has an incentive compensation plan under which the sales manager receives a bonus equal to 10 percent of the company's income after deductions for bonus and income taxes.
Draw curves representing distribution of original population : Sketch curves representing the distribution of the original population and the sampling distribution of x for a sample of size n+16.
Calculate the elasticity of demand for alcohol consumption : Explain why it is or is not possible to calculate the elasticity of demand for alcohol consumption for the state situation?
Draper treatment of the lease : The building has an expected economic life of 30 years. Which of the following statements is correct regarding Draper's treatment of the lease?
Draft a memo for the file outlining : Caleb Samford calls you and says that his two-person S corporation was involuntarily terminated in February 2010. He asks you if they can make a new S election now, in November 2011. Draft a memo for the file outlining what you told Caleb.
Experience of either sending or receiving bad news message : Scandals are useful because they focus our attention on problems in ways that no speaker or reformer ever could. Write a response in which you discuss the extent to which you agree or disagree with the claim. In developing and supporting your positi..
Northwick company dividend revenue : The following January, Shaver announced a $100,000 net income for 2011 and declared a cash dividend of $.50 per share on its 100,000 shares of outstanding common stock. The Northwick Company dividend revenue from Shaver Corp. in January 2011 would..
Write equations to show how nitronium ions sulfuric acids : Write equations to show how nitronium ions might be formed using a mixture of nitric and sulfuric acids

Reviews

Write a Review

Accounting Basics Questions & Answers

  Direct-material price variance

Assume that the company computes variances at the earliest point in time. Taylor's direct-material price variance was:

  What is the inventory turnover ratio

Assume a firm's inventory level of $13,500 represents 37 days' sales. What is the inventory turnover ratio? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

  Tax effect-four batches of new stock

Brian purchased 500 shares of the substantially identical stock for $3,000. What is the tax effect fir Brian as well as what will be the basis of each of four batches of new stock?

  Elimination in the consolidation process

The amount of unrealized intercompany profit in ending inventory at December 31, 2006 that should be eliminated in the consolidation process is:

  What are rhoda penalties for failure to file

Rhoda, a calendar year taxpayer, files her 2010 return on November 4, 2012. She did not obtain an extension for filing her return, and the return reflects additional income tax due of $25000.

  Prepare the stockholder equity portion of the balance sheet

On January 1, 2012 JumpinJehosaPhats Inc. has been authorized to issue 1,000,000 common shares with a Par Value of $1. In the process of incorporating, the sole proprietor owner's equity accounts must be closed and the equity must now reflect a co..

  What action do you recommend jamestown take

What are Jamestown's options regarding the treatment of these three customers? Based on this initial customer profitability analysis, what action do you recommend Jamestown take with each of these three customers?

  External failure costs change

How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.

  Weighted average shares outstanding

The common stock equivalents added to the company's weighted average shares outstanding used for basic earnings per share was computed using the treasury stock methods.

  Calculate profit as a percentage of sales

Prepare a paragraph of explanation/interpretation of the data as if this were a small part of a lengthy report to potential investors.

  Conversion costs during specific month

The following costs were incurred in August: Direct materials $37,000 Direct labor 14,000 Manufacturing overhead 38,000 Selling expenses 10,000 Administrative expenses 28,000 Conversion costs during the month totaled:

  Prepare a document flowchart to document the acquisition

Since opening its dorrs in Hawaii two years ago, Oriental trading has enjoyed tremedous success. Oriental Trading purchases textiles from Asia and resells them to local retail shops.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd