FAR 11 Flashcards
When should a lessor recognize in income a nonrefundable lease bonus paid by a lessee on signing an operating lease?
Deferred and recognized equally over the life of the lease.
At the inception of a capital (finance) lease, the guaranteed residual value should be?
Included as part of a minimum lease payments at present value.
Annual rental revenue equals?
The total rental revenue from the lease allocated over the full life of the lease.
How should a capital (finance) lease be recorded?
The present value of the minimum lease payment less any executory costs (taxes). Taxes are expensed when paid.
What is the criteria for a capital (finance) lease?
Ownership transfers at the lease (upon finaly payment or required buyout)
Wrtten option for bargain purchase
90% of leased property FV less than or equal to PV of lease payments
75% or more of asset economic life is being committed in lease term.
What do you depreciate for OW part of OWNS?
Economic life of the asset.
What do you depreciate for NS part of OWNS?
Lesser of lease life or economic asset life.
How do you record the entry for capital lease?
Dr. Fixed asset-leased property
Cr. Liability-obligation under capital lease
What is the difference in profits of sales type an direct financing lease?
Sales type lease- 2 profits- gain on sale and interest income
Direct financing lease- 1 profit
Interest income
What consititutes a direct financing lease?
The fair value of the leased property at the inveption of the lease is the same at the cost of carrying amount.
