F5-Leases Flashcards
How do you get the future value of an investment with the discount rate and PV of an investment?
Future value= PV / discount rate
How do you figure the interest accrued with the PV of a lease?
You take the discounted PV and multiply times the interest rate and multiply by the portion of the year outstanding.
How do you calculate the PV of a minimum lease payment?
If it is paid at the beginning of the period->PV of an annuity due, if it is paid at the end of the period->PV of an ordinary annuity (in arrears)
* you use the lower of lessor’s rate or implicit rate)
How do you amortize a leasehold improvement?
Over the LESSER of the economic life of the improvement or the remaining life of the lease.
*May have to prorate for portions of a year.
How much gain is deferred in a sale-leaseback for US GAAP?
The entire gain if a “major” portion or rights is retained by lessor (over 90% based on PV to Sales price, or portion of lease term to remaining life). Defer all gain.
If minor rights, recognize all gain.
-if between major and minor(10-90%) defer gain up to the PV of min lease pmt.
What is recorded for a lease bonus?
It is amortized over the term of the lease.
How to you depreciate a leased asset?
S/L over the lease term if lessee does not take ownership of or have bargain purchase option at the end of the lease
When do you defer a gain for a sale-leaseback using IFRS?
When it is a finance lease or an operating lease and the sales price is above the FV.
-The gain is amortized over the depreciable period of the leased asset.
How do you record operating lease expense?
Equally over the life of the lease.
- You record a prepaid expense for the payments.
- Then recognize expense monthly for the average rental amount. (DR- Exp, CR- Prepaid Rent)
- When prepaid rent is 0, you book expense to rent payable for the next year.( DR-Exp, CR- Rent Payable)
How do you calculate lessor’s profit on a sales-type (finance) lease?
Take FV of asset (used as cash price) less:the cost of the asset.
-amortize over the depreciable period of the leased asset.
How are security deposits accounted for with operating leases?
They are recorded as prepaid assets if they are refundable.
**if not refundable, they are amortized over the life of the lease (unearned rev/liability)
When do you recognize a loss on a sales-leaseback transaction?
**When the FV
