Seeking ways to maintain and improve cash balances

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Reference no: EM132070998

General Tools is seeking ways to maintain and improve cash balances. As company controllower, you have proposed the sale and leaseback of much of the company's equipment. As seller-lessee, General Tools would remain the right to essentially all of the remaining use of equipment. The term of the lease would be six years. You previously convinced your CFO of the cash flow benefits of the arrangement, but now he doesn't understand the way you will account for the transaction. "I rally had counted on that gain on the sale portion of the trasaction to bolster this period's earnings. What gives." he wondered. "Put it in a memo, will you? I'm having trouble following what you're saying to me." Write a memo to your CFO. Include discussion of each of these points. 1. How the transaction should be accounted for. 2. Why General tools will not get the gain the CFO had counted on.

Reference no: EM132070998

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