Lease 1

Business & Finance
Price: $10 USD

Question description

ABC Company enters into a lease agreement with XYZ Corporation for laser tech machines. The lease agreement qualifies as an operating lease. However, there is one thing that stands out. There is a bargain-purchase option. After the 3-year lease term, each laser tech machine can be purchased for $500, even though the market value is $850.

You are the controller of ABC Company. You feel that the machine should be recorded as a capital lease because of the bargain-purchase option. Your manager, Martha, feels that at the end of the 3-year term, the laser tech will not be worth $500 because of rapid advances in technology.

  • What is the ethical issue?
  • What should you, the controller, do?
  • What are the generally accepted accounting principles (GAAP) for reporting a lease as a capital lease?


1.) 400-600 WORDS

Tutor Answer

(Top Tutor) Daniel C.
School: UC Berkeley
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