Acc/541 Memo

| Team D| Memo To:Jacob Matthews From:Team D designation:2/8/2012 Re:FASB question on rental and Lease Structures Our client, alphabet Trucking, before long owns 100 trailers. The company has the opportunity to add-on its operations by adding a untested client. This new opportunity would look at ABC Trucking to increase its inventory to 120 trailers 20 more than than the company currently owns. ABC Trucking is shy how long the relationship will last with the new customer. Research has been completed on put one over ins and aim structures for direct sterning, gross revenue fictitious character, and operate precondition of a contracts. This research should provide guidance on which fill order would benefit the company the most. Direct financial backing and sales type hires are capital wages. Capital leases are financing minutes that must meet one or more of these foursome criteria: 1. The lease transfers ownership of the prop to the lessee by the name and address of the lease term. 2. The lease contains a bargain grease ones palms filling that allows the lessee to grease ones palms the asset for less than market value at the end of the lease term. 3. The lease term is equal to 75 portion or more of the estimated economic life of the asset. 4.

At the ascendent of the lease term, the present value of the minimum lease payments equals or exceeds 90 percent of the fair value of the contract property (Schroeder, Clark, and Cathey 2011, p.432-433). To qualify as a direct financing lease at least one of the capital lease criteria and both(prenominal) lessor certainty criteria must be met, and the lessor has no m anufacturers or dealer profit or loss (Schro! eder, Clark, and Cathey 2011, p.440). A direct finance lease closely resembles a render beca drop the lessor is seen as a lending institution. Assets are purchased by the lessor for the main(a) use of the lessee. The company may not have the extension judge necessary to obtain a loan or to purchase the needed assets. A direct financing lease may provide our ABC trucking an easier way to pay back the...If you want to get a full essay, order it on our website: OrderEssay.net

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