Question - Just need the questions answered below based on scenario. there is no word minimum or maximum. need ASAP.
Please read the scenario below.
Greeley Golf and Country Club entered into a lease agreement for 25 top of the line golf carts with GPS ball tracking. At the time that the agreement was signed, the fair value of each cart was $10,800. After the 3-year lease term, the company can purchase each cart for $8000. The fair value of the carts is expected to be $8,500, but because Greeley is such a good client, the Carts salesman has included this special end-of-lease price in the agreement.
Additionally, Greeley leased a specialized turf mower. The mower has a computerized function that automatically adjusts the height of the blade to account for minute variances in the topography of the putting greens. This prevents "scalping" of the very valuable turf grass. The mower has a fair value of $75,000, and is leased for 5 years. The present value of the lease payments works out to be $12,000 per year.
Jane York, the company Controller thinks the financial statements must recognize both as capital leases. Tony Hawkins, the company President, disagrees.
Discuss the following questions in your initial post:
• Do the leases qualify as operating or capital leases? Explain your reasoning.
• If both leases are classified as operating leases, what is the ethical issue at stake?
• If both leases are classified as capital leases, what ethical issues are at stake?
• How are the financial statements affected under the above scenario?
• What disclosure notes must be included with the statements?
• What should Jane York, the Controller, do?