QUESTION

# ACC 541 Week 3 DQs and Summary

This paperwork ACC 541 Week 3 - Discussion Questions and Summary contains:

DQ1: Capital leases and operating leases are the two classifications of leases described in FASB pronouncements from the standpoint of the lessee.

Describe how an operating lease would be accounted for by the lessee both at the inception of the lease and during the first year of the lease, assuming the lessee makes equal monthly payments at the beginning of each month of the lease. Describe the change in accounting, if any, when rental payments are not made on a straight-line basis.

DQ 2: On January 1, 2006, Von Company entered into two noncancelable leases for new machines to be used in its manufacturing operations. The first lease does not contain a bargain purchase option; the lease term is equal to 80 percent of the estimated economic life of the machine. The second lease contains a bargain purchase option; the lease term is equal to 50 percent of the estimated economic life of the machine.

How should Von classify each of the two leases? Why?

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