Leases

Question 1

How to calculate finance lease liability for the balance sheet on December 31, Year 2? Payments made at inception

Answer 1

Question 2

Why does each lease payment split between interest and principal reduction in a finance lease?

Answer 2

Question 3

How to calculate the initial ROU asset and lease liability in a finance lease with guaranteed residual value?

Answer 3

Question 4

How to calculate the lease liability at Year-End in a finance lease when the first payment fully reduces principal?

Answer 4

Question 5

How to determine the amount to capitalize as a Right-of-Use (ROU) asset for a finance lease with payments at the beginning of each period?

Answer 5

Question 6

How to calculate the straight-line monthly rent expense for an operating lease with rent-free periods?

Answer 6

Question 7

What are the key differences between a finance lease and an operating lease?

Answer 7

Question 8

How do you calculate annual amortization expense for a Right-of-Use (ROU) asset when the lease term is shorter than the asset’s useful life?

Answer 8

Question 9

How do you determine the initial lease liability when a finance lease includes a likely-to-be-exercised purchase option?

Answer 9

Question 10

Key Indicators of Reasonable Certainty that a Purchase option is likely to be exercised.

Answer 10

Question 11

How do you determine the ROU asset at inception for a finance lease?

Answer 11

Question 12

What components and nonlease components are included and excluded in PV lease obligation?

Answer 12

Question 13

What are the five criteria, of which at least one must be met, to classify a lease as a finance lease?

Answer 13

Question 14

Calculate Carrying Value of Right-of-Use (ROU) Asset in Finance Lease

Answer 14

Question 15

What all goes into calculating the PV of Lease liability

Answer 15

Question 16

When do operating lease expense begin accruing? (ie rent expense)

Answer 16

Question 17

How to calculate initial Right-of-Use (ROU) Asset balance for Operating Lease with Lease Incentives

Answer 17

Question 18

Guaranteed residual value vs expected residual value

Answer 18

Question 19

PV of lease payments and PV of PO. At the end of the lease term, should there be a left over balance if the PO is likely to be exercised?

Answer 19

Question 20

Lease Expense Components – Included vs. Excluded

Answer 20

Question 21

Steps to Calculating Lease Liability with a Residual Value Guarantee

Answer 21

Question 22

How are initial direct costs accounted for in the lease

Answer 22

Question 23

How does a lessee record monthly lease expense for a short-term lease?

Answer 23