You are analyzing the balance sheet of a large manufacturing company and come across the followin account in the property, plant and equipment section:
Equipment acquired under finance lease = $400,000
The footnotes indicate that the lease was signed three years ago, that there are several years left in the finance lease, and that the equipment reverts to the lessor at the end of the lease term.The reporting company does not use the accumulated depreciation account for assets under finance leases.
Explain (a)what this account and (b)amount means, and (c)how it came to be included as a long-term asset.

Question

Quizplus · Accepted Answer

The Answer of You are analyzing the balance sheet of a large manufacturing company and come across the followin account in the property, plant and equipment section:
Equipment acquired under finance lease = $400,000
The footnotes indicate that the lease was signed three years ago, that there are several years left in the finance lease, and that the equipment reverts to the lessor at the end of the lease term.The reporting company does not use the accumulated depreciation account for assets under finance leases.
Explain (a)what this account and (b)amount means, and (c)how it came to be included as a long-term asset.

You Are Analyzing the Balance Sheet of a Large Manufacturing