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Capital Leases as in Substance Purchases of Assets.

NEED SOLUTION FOR THESE CASES

Case 13-11 Capital Leases as in Substance Purchases of Assets.
Required:

Explain how a capital lease is in substance a purchase of an asset. Tie your explanation to the Conceptual Framework's definitions of assets and liabilities.

PLEASE SEE ATTACHMENT for the other two cases, 12-4 and 13-5

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Case 13-11 Capital Leases as in Substance Purchases of Assets.

A capital lease is set up the same as a purchase. The full cost of the equipment is recorded as a debit to Fixed Assets; the amount paid up front (down payment) is a decrease (credit) to Cash; the remaining amount owed is set up like Notes Payable but is called Capital Lease. In addition, you will have been depreciating the asset.
During the term you have been paying down the amount owed (decreasing Capital Lease) and recording the interest portion as an expense. Now you are down to the last payment. All that should be done is zero out the amount owed in Capital Lease and record the interest portion just as it has been done all along.

Case 12-4 Intraperiod vs. interperiod Income tax allocation

(a) Intraperiod income tax allocation requires that the total income tax expense of a
corporation for the period be apportioned to the appropriate sections of its ...

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The solution discusses capital leases as in substance purchases of assets.

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