The Following Are Some of the Characteristics of an Asset

question 43

Essay

The following are some of the characteristics of an asset available for lease:

Required:
a.Determine the amount of lease payment that the lessor would require to lease the asset.
b.Compute the present value of minimum lease payments for the lessee.
c.Compute the present value of minimum lease payments for the lessor.
d.Evaluate whether the lessee should classify the lease as operating or capital lease using the quantitative guidelines in ASPE.

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Definitions:

Retail Inventory Method

An accounting method used by retailers to estimate inventory cost by calculating a cost-to-retail percentage and applying it to the ending retail value of inventory.

Inventory Valuation

The method of calculating the cost associated with inventory at the end of an accounting period to determine the cost of goods sold and inventory on hand.

LIFO Perpetual Inventory System

An inventory management method where the last items added to inventory are assumed to be the first sold, continuously updated.

Ending Inventory

The amount of goods available for sale at the finis of an accounting cycle.