Reference no: EM132985665
Presented below are three different lease transactions in which Ortiz Enterprises engaged in 2010.Assume that all lease transactions start on January 1, 2010.In no case does Ortiz receive title to the properties leased during or at the end of the lease term.
Lessor Renner Co. Flynn Co. Miley Inc. Type of property Bulldozer Truck Furniture Bargain purchase option None None None
Lease term 4 years 6 years 3 years
Estimated economic life 8 years 7 years 5 years
Yearly rental $13,000 $20,000 $ 3,000
Fair market value of leased asset $80,000 $96,000 $20,500
Present value of the lease rental payments $48,000 $82,000 $ 9,000
Instructions
Problem (a) Identify the leases above as operating or capital leases. Explain.
Problem (b) How should the lease transaction for Flynn Co. be recorded on January 1, 2010?
Problem (c) How should the lease transaction for Miley Inc. be recorded in 2010?
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