Chapter 18 (Accounting for Leases) Flashcards
Operating Lease Initial Measurement: Lessee: Calculation
Initial Measurement Add: Initial Direct Costs Add: Prepayments Subtract: Incentives Right of Use Asset:
Operating Lease Initial Measurement: Lessee: Entries Prior to Commencement
Dr Prepaid Initial Direct Costs
Cr Cash
Dr Prepaid Lease Payment
Cr Cash
Dr Cash
Cr Liability for Lease Incentive
Operating Lease Initial Measurement: Lessee: Entries on Commencement
Dr Right of Use Asset Dr Liability for Lease Incentive Cr Lease Liability Cr Prepaid Lease Payment Cr Prepaid Initial Direct Costs
Operating Lease Subsequent Measurement: Lessee: Lease Expense Calculation
Annual Total Payments Add: Initial Direct Costs Add: Prepayments Subtract: Incentives Total Payments
Total Payments/Years (Lease Term)=Annual Lease Expense
Operating Lease Subsequent Measurement: Lessee: Amortization Table #1 Labels
Date
Payment (Cr Cash)
Interest (Implicit Rate)
Reduction in Lease Liability (Dr Lease Liability)
Balance
Operating Lease Subsequent Measurement: Lessee: Amortization Table #2 Labels
Date
Lease Expense (Dr Lease Expense)
Interest (Take values from Table #1)
Accumulated Amortization (Lease Expense-Interest)
Operating Lease Subsequent Measurement: Lessee: 12/31
Dr Lease Liability
Dr Lease Expense
Cr Cash
Cr Accumulated Amortization
Operating Lease Subsequent Measurement: Lessee: End of Lease Term
***Take it off the books
Dr Accumulated Amortization
Cr Right of Use Asset
Operating Lease: Lessor: Entries Prior to Commencement
***Expensed using the straight line method
Dr Prepaid Initial Direct Costs
Cr Cash
Operating Lease: Lessor: Commencement
Dr Cash
Dr Initial Direct Cost Expense
Cr Revenue
Cr Prepaid Initial Direct Costs
Finance Lease Initial Measurement: Lessee: Entries Prior to Commencement
Dr Prepaid Initial Direct Costs
Cr Cash
Finance Lease Initial Measurement: Lessee: Commencement
Dr Right of Use Asset
Cr Prepaid Initial Direct Costs
Cr Lease Liability
Finance Lease Initial Measurement: Lessee: Amortization Table Labels
Date
Payment (Cr Cash)
Interest (Implicit rate if known, if unknown then incremental borrowing rate)
Reduction in Lease Liability (Dr Lease Liability)
Balance
Finance Lease Initial Measurement: Lessee: First Lease Payment
Dr Lease Liability
Cr Cash
Operating Lease Initial Measurement: Lessee: First Lease Payment
Dr Lease Liability
Cr Cash
Finance Lease Subsequent Measurement: Lessee: Entries for Interest
Dr Lease Liability
Dr Interest Expense
Cr Cash
Finance Lease Subsequent Measurement: Lessee: Entries for Amortization
Dr Amortization Expense
Cr Accumulated Amortization
Sales-Type Lease Initial Measurement: Lessor: Commencement
Dr Net Investment in Lease - Sales Type
Dr COGS
Cr Inventory
Cr Sales Revenue
Dr Initial Direct Cost Expense
Cr Cash
Sales-Type Lease Initial Measurement: Lessor: First Payment
Dr Cash
Cr Net Investment in Lease - Sales Type
Sales-Type Lease Subsequent Measurement: Lessor: Amortization Table Labels
Date
Payment (Dr Cash)
Interest (Cr Interest Revenue)
Reduction in NIL-ST (Cr NIL-ST/Lease Receivable)
Balance
Sales-Type Lease Subsequent Measurement: Lessor: Entries
Dr Cash
Cr Interest Revenue
Cr Net Investment in Lease - Sales Type
Group I Criteria
- Transfer of Ownership
- Purchase Option
- PV Test, Greater than or equal to 90%
- Lease Term Length, Greater than or equal to 75%
- Specialized
Group 2 Criteria
- PV Test
2. Probable Collection of all Lease Payments
