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BonneSante S

James Huang

Teacher Lau

ACCT 495

May well 2, 2015

BonneSante S i9000. A.

1 ) How very well do the key accountant's assumed lease characteristics line up with the company's earlier lease term experience? Example 1:

The truck lease would be made up as a frequent equipment rental with the interest every month. Pickup truck Rental Expense800

Interest Expense40

Cash840

Illustration 2:

Whenever we determine the probability of lease conditions, for 60% the rental will be pertaining to 6 years, thus we uses 6 years because the rental term. Then a initial direct cost is was taken into consideration by total of 72 weeks, which will be 83 a month. Then we utilize the PV of the future payments to discover the amount paid out over the lease contract term to get the initial 5 years and for the very last renewed 12 months because the lease contract amount differs. Also all of us use 5% for the incremental funding rate.

%

Acc. %

Total$

d

Pay $

Ind. Cost/yr

Yearly cost

PV/payment

5 yr

40%

100%

twenty, 000

five

4, 1000

1, 200

5, two hundred

4, 074

6 365 days

30%

60%

25, 500

6

four, 167

one particular, 000

five, 167

three or more, 855

Times

7 yr

20%

30%

30, 1000

7

5, 286

857

5, 143

3, 655

8 year

10%

10%

35, 000

8

4, 375

547

4, 922

3, 331

The most possible is six years. The diary entry will probably be like this: Hire Expense3, 855

Cash3, 855

Illustration several:

Because there is zero possibility it can easily go beyond your five years, it will be set for the 5-year rental term for 100%. It will be operational rental because it will not satisfy one of the criteria. Hire Expense5, 500

Cash5, 1000

Illustration some:

%

Acc. %

and

Pay $

6 month

30%

completely

12

4 hundred

7 month

50%

many of these

24

500

8 yr

20%

twenty percent

36

six hundred

For yr 6 and 7 the lease will be 500 each month for two years. Rent Expense500

Cash500

2 . How might you view the responsibility for upcoming lease payments BonneSante will have to record under the ED's lessee accounting proposal? Is it like regular traditional bank debt? If perhaps not, the facts? Would you contain at 100 % of the identified amount in a debt-to-equity ratio? Rental lease contract payments...

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