The Park Company owns 80% of the outstanding common stock of the Sea Company. Park is about to lease a machine with a 5-year life to the Sea Company. The lease would begin January 1, 20X3.
Required:
Explain the adjustments that will be required in the consolidation process if each of the following occurs.
a.The lease is an operating lease.
b.The lease is a direct financing lease with a bargain purchase option.
c.The lease is a sales-type lease with a bargain purchase option.

Question

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The Answer of The Park Company owns 80% of the outstanding common stock of the Sea Company. Park is about to lease a machine with a 5-year life to the Sea Company. The lease would begin January 1, 20X3.
Required:
Explain the adjustments that will be required in the consolidation process if each of the following occurs.
a.The lease is an operating lease.
b.The lease is a direct financing lease with a bargain purchase option.
c.The lease is a sales-type lease with a bargain purchase option.

The Park Company Owns 80% of the Outstanding Common Stock