F4 - Liabilities Flashcards
Does a check take effect when it is cut or when it is mailed?
When it is mailed.
It is usually recorded in the books when it is cut, but the books will need to be adjusted if it is not mailed until the following period.
When the amount of a lease liability is calculated using a PV of annuity DUE and the “N” figure for periods equals the total amount of payments required in the lease agreement, AND the first payment is due on the date of the lease inception, do you need to subtract the first lease payment to produce the correct BV of lease liability?
Yes. The PV of annuity due is lower than the PV of ordinary annuity BECAUSE the first (and subsequent) payment(s) is (are) made sooner.
Are direct costs of lease negotiation such as commissions and legal fees capitalized? If so, are they capitalized onto the ROU Asset, Lease Liability, or both?
Direct costs such as commissions and legal fees are capitalized onto the ROU Asset NOT the lease liability.
The entry would be as follows:
Dr. ROU Asset (including commissions & legal)
Cr. Lease Liability
Cr. Cash (commissions & legal)
