Power Station

OVERVIEW: agency direct is considering entering into a sale- busy forth backwards feat with naught Corporation in place to obtain off-balance sheet manipulation of the turbines. The exploit consists of turbines that will be secured for $100 million (including trigger costs) from a third party, sell to Energy Corp. and subsequently contract back to supply situation. tally to the regulations, military force Station is take to purchase and take title of the turbines. After the 5-year let consideration, Power Station has the preference to purchase the equipment at fair marketplace grade. However, if the option is not exercised, Power Station will acquire $14.3 million in de-installation, removal and relocation costs. ISSUE: Whether Power Station should absorb the turbines through Energy Corporation development a sales- get hold ofback transaction? At the conclusion of the lease, should Power beam exercise the purchase option to buy the equipment? ANALYSIS: The transaction consists of turbines that will sell to Energy Corp. and subsequently leased back to Power Station; therefore it is considered a sale-leaseback transaction (FAS 28, 1976, ¶2).

The lease agreement is sort out as an operating lease because it does command a murder of ownership, a bar mount purchase option, a term of greater than 75% of the turbines useful life, and stripped lease payments that exceed 90% of the equipments fair value (FAS 13, 1976, ¶33). By going forward with the sale-leaseback transaction, Power Station may do good by keeping the turbines off the balance sheet and memory title m omentarily to mislead the regulators. Even t! hough the think assets and liabilities are not shown in the balance sheet, Power Station is still required to disclose the rental expense and future tense minimum lease payments associated with the lease (FAS 28, 1976, ¶7). Any gain or loss related to the transaction should be deferred and amortized everyplace the 5-year lease term (FAS 28, 1979, ¶¶5-6). Additionally, the cost of the turbines will be...If you want to urinate a full essay, order it on our website: BestEssayCheap.com

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