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CPA- FAR > F5 > Flashcards

F5 Flashcards

1
Q

Under GAAP, what are the 2 types of leases?

A

(Rental) Operating Lease or (Sale in substance) Capital Lease/Sales Type/Direct Financing Lease

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2
Q

Under IFRS, what are the 2 types of leases?

A

(Rental) Operating Lease or (Sale in substance) Finance Lease

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3
Q

For operating leases, how is rental income/expenses recorded?

A

using straight line method (even if not equal payments)

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4
Q

For operating leases, how is a lease bonus (prepayment) recorded?

A

deferred charge and amortize SL (ex: commission paid to RE agent)

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5
Q

For operating leases, how is a leasehold improvement recorded?

A

capitalize and depreciate over lesser of useful life or lease term

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6
Q

For operating leases, how is the fixed asset recorded by the lessor?

A

depreciate over useful life

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7
Q

For operating leases, how is a nonrefundable security deposit recorded?

A

Lessor = unearned revenue. Lessee = capitalize, prepaid rent expense

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8
Q

For operating leases, how is a refundable security deposit recorded?

A

Lessor = A/P. Lessee = A/R

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9
Q

What is the LESSEE criteria under GAAP for a CAPITAL lease?

A

OWNS= Ownership. Written bargain purchase option. 90% of FV < PV. 75% of asset life < lease term

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10
Q

What is the LESSEE/LESSOR criteria under IFRS for a CAPITAL lease?

A

OWES FACS= Ownership. Written bargain purchase option. Economic life (majority). Substantially all FV. Fluctuations in FV accrue to lessee. Ability to continue lease. Cancelable. Specialized asset

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11
Q

What is the LESSOR criteria under GAAP for a SALES/DIRECT FINANCING lease?

A

Lessor needs all the LUC = Lessee “OWNS” property. Uncertainties do not exist regarding unreimbursable costs to be incurred by lessor. Collectability is reasonably assured

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12
Q

For capital leases, how is the lease recorded by the lessee?

A

Capitalize= (LCM) lesser of FV or Cost. Interest Rate = lesser of implicit rate or lessee’s rate

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13
Q

For capital leases, how is the depreciation of the lease recorded by the lessee?

A

SL = Asset – SV = Base / Period of Benefit = dep exp

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14
Q

What is the period of benefit for GAAP?

A

OW = asset life. NS = lease term

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15
Q

What is the period of benefit for IFRS?

A

lesser of asset life or lease term

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16
Q

For a sales-type/direct financing lease, how do you calculate the gross investment?

A

GROSS = lease payment + unguaranteed RV

17
Q

For a sales-type/direct financing lease, how do you calculate the principal (net investment)?

A

PRINCIPAL = GROSS * PV

18
Q

For a sales-type/direct financing lease, how do you calculate the interest (unearned int rev)?

A

INTEREST = GROSS – NET

19
Q

For a sales-type lease, how do you calculate the COGS?

A

COGS = Cost of Asset – PV unguaranteed RV

20
Q

For a direct financing lease what is the PV?

A

PV = CV = COGS

21
Q

What are the general rules for sale-leaseback

A

0% (IGNORE) 10% (RULES) 90% (LOAN) 100%

22
Q

For subleases, if the original lease is an operating lease, what is the sublease?

A

operating lease

23
Q

For subleases, if the original lease is an capital lease, what is the sublease?

A

OW = capital, NS = operating

24
Q

What are other terms for stated rate?

A

coupon or nominal rate

25
Q

What are other terms for market rate?

A

effective rate

26
Q

Are debentures (bonds) secured or unsecured?

A

unsecured

27
Q

Are collateral trust bonds secured or unsecured?

A

unsecured

28
Q

Are mortgage bonds secured or unsecured?

A

secured by real property

29
Q

What is a convertible bond?

A

can convert to C/S

30
Q

What is a term bond?

A

single fixed maturity date (all principle due at end of term)

31
Q

What is a serial bond?

A

Pre-numbered bond. Can redeem portion by number

32
Q

Bonds are usually in denominations of?

A

$1,000.00

33
Q

Bond price is quoted at what

A

100s, % of par value

34
Q

How do you calculate the check amount (bond interest)

A

coupon x face

35
Q

How often is bond interest paid?

A

US = semiannually, Rest = annually

36
Q

How do you account for BIC?

A

defer and amort SL

37
Q

What is the SL Method of Bond Premium/Discount Amort?

A

Amort = Premium or Discount / # periods outstanding. Int Exp = Check amount – premium amort + discount amort

38
Q

What is the Effective Interest Method of Bond Premium/Discount Amort?

A

Amort = Int Exp – Int Paid. Int Exp = NCV x effective %. Int Paid = Face x coupon %

39
Q

How do you account for bonds issued between interest dates?

A

Cash = accrued interest + price of bond

CPA- FAR (9 decks)

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