Theory and Analysis Coursework Example | Topics and Well Written Essays - 500 words

Theory and Analysis - Coursework Example The amount to be recorded would be either the present value or the fair market value of the asset. In this case the amount to be recorded is the present value which is calculated by discounting annuity due payments by discount rate of 8%. Amount totaled to be $86,243 in comparison to $96,000 i.e. the fair market value. b) The costs associated with the lease are taxes, insurance, maintenance and depreciation. These costs are obligatory to pay as it is considered incidental to ownership. These costs would be determined during the operations conducted by or on the property. Depreciation can be charged through straight line method. c) Lani would record lease transaction on December 31st,2006 on the balance sheet as: {Principal-[Payment-(Principal*interest percentage)]} This will give you the amount to be balanced as â€Å"Lease† in the liability section as well as provide you with the proportion of interest payment from the Annual annuity paid. CASE 13-5: Lease in order should mee t the following criteria for Doherty Company to classify it as a capital lease: Firstly, the lease should transfer ownership of the good to the lessee at the end of the lease term. Also, it should be noncancelable plus renewal options and periods should be attached.