Deane Company Lease Agreement with Blossom Builders Associates

Is Deane Company's contract with Blossom Builders Associates comprised of lease components or non-lease components?

According to the provided data, identify whether each component of the contract is a lease component or a non-lease component.

Answer:

The Deane Company's contract with Blossom Builders Associates comprises both lease components and non-lease components.

The lease agreement between Deane Company and Blossom Builders Associates includes both lease components and non-lease components, as defined by ASC 842. Lease components refer to parts of a contract that provide the lessee with the right to use an underlying asset, like property, for a specified period.

Lease Components: The office space and computer equipment are considered lease components in this contract. Deane Company has the right to use and operate the office space and computer equipment, for which they make monthly payments.

Non-Lease Components: Included in the contract as non-lease components are maintenance and repair services for office and computer equipment, such as elevator repairs, air conditioning cleaning services, and general maintenance. The installation of a separate air filtration system also falls under non-lease components.

It's crucial to distinguish between lease and non-lease components in a contract, as they impact how costs are allocated and accounted for. Lease components should be included in the lease agreement, while non-lease components should be excluded from lease calculations.