The following sections provide suggested solutions for each case requirement, discuss answers that students commonly provide, and suggest ways in which instructors can expand the class discussion to incorporate additional points as they implement the case. Instructors can modify the information associated with Pane's accounting policies and procedures, the individual transactions, and the year-end information using the “PitG—Accounting Policies, Transactions and Year End Info.docx” file that is included with the supplemental case materials.
This transaction involves an operating lease under FASB Accounting Standards Codification (ASC) 840 from the lessor's point of view. While the problem gives the operating lease classification, instructors may modify the facts to have the student determine the appropriate classification by:
Pane should make the following entries to record the purchase of the equipment, the first receipt of rent, and the payment of the executory costs:
Two common issues that students encounter in this problem are:...