BU397 Chapter Notes - Chapter 20: Finance Lease, Operating Lease, Leaseback
Document Summary
Can sell property, realize gain/cash flow from sale of that asset, and then they can lease it back b/c they still need those buildings as part of their operations. If equipment purchase has already been financed, a sale-leaseback can allow the seller to refinance at lower rates (if rates have decreased: can provide additional working capital when liquidity is tight. If the lease meets the capital or finance lease criteria, seller-lessee accounts for the transaction as a sale and the lease as a capital or finance lease. Purchaser-lessor accounting: lessor applies regular lease standards. Given: on jan 1, 2015 lessee inc. sells a used boeing 747 with a cost of . 5 million and a book value of . 5 million to lessor inc. for million and immediately leases it back, conditions are: 15 year lease term with equal rental payments of ,487,443 at beginning of each year fv = million on jan 1/15 and 15 year economic life.
