Leases

Question 1

what is the defintion of a lease?

Answer 1

A contract that conveys the right to use an underlying asset for a period of time in exchange for consideration.

Question 2

what is an right-to-use asset?
what is the journal entry?

Answer 2

represents a lessee’s right to use an underlying asset for the lease term.

Dr right of use asset (NCA)
Cr lease liability
Cr cash / payable

Question 3

how do you identify a lease agreement and what does the right to control depend on having?

Answer 3

• a contract contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration,

1- the ‘right to obtain’ substantially all of ‘the economic benefits’ from using the asset.
2- the right to ‘direct the use’ of the identified asset.