The company ran into some financial hardships during 2020 and ended up "refinancing" some debts. In this situation, 4 pieces of equipment and some usage debts were lumped into the operating lease for another piece of equipment. The 4 original pieces of equipment were all capital leases and once the paperwork was signed for the new lease, they all became "debt-free" assets of the business. My question is how am I supposed to record this transaction. In essence, multiple liabilities were eliminated by having them replaced by an operating lease which is not to be constituted as a liability on the balance sheet.
USA Liabilities converted to operating lease
- Thread starter Jseifert
- Start date
Operating Lease Accounting for ASC 842 Explained & Example
Read a full summary of the new operating lease accounting rules under ASC 842, including a complete example and journal entries.
leasequery.com
Hi jseifert
Please read the attached. Operating leases will show as a liability on the balance sheet. The article lists an exception to that.
Hope that helps,
Kat