leases Flashcards
(21 cards)
Present value of $1
amount that must be invested NOW at a specific interest rate so that $1 can be paid or received in the future
Future value of $1
Compound interest. Amount that would accumulate at a future point in time if $1 were invested now. Interest factor causes future value to be greater than 1
PV of ordinary annuity
current worth of series of identical periodic payments to be made in the future
future value of ordinary annuity
SUM to be received at some point in the future of identical periodic investments made from NOW until some future point
how is an operating lease bonus handled?
Classified as asset (deferred charge) and AMORTIZED using SL over life of lease for LESSEE
Deferred(unearned income) and amortized into income over life of lease (LESSOR)
how are leasehold improvements under operating leases handled
capitalized!! and depreciated over LESSER of LEASE LIFE or IMPROVEMENT life
Lessee capital lease criteria
O - Owner transfer at end of lease
W - written option for bargain purchase
N - 90% of PV of lease payments
S - 75% of economic life
MUST MEET 1
Lessor criteria for sales type/direct financing lease
L - lessee “owns” property (1 of 4 owns criteria met)
U - No uncertain cost
C - Collection of payments assured
MUST MEET ALL
What value does the LESSEE record a finance lease
LESSOR of FV or COST (PV of payments)
What is included in the LESSEE capitalized cost amount of a capital lease
1) Payments
2) PV of bargain purchase option
3) PV of guarenteed residual value
IFRS INCLUDES direct cost such as maitenance, tx etc. Causes asset and liability to be at different amounts
how is a lease liability amortized
the effective interest method
Gross investment formula (sales type)
PV of payments
+ unguarenteed residual value
Net Investment Formula (sales type)
PV of payments
+residual value
answer * interest rate? i think double check
Unearned interest revenue (sales type)
Gross investment
- net investment
COGS (sales type)
Cost of asset
- PV of residual value
Sales revenue (sales type)
Cost + profit = PV = selling price = FV
gross investment (direct financing)
lease payment + unguarenteed residual value
Net investment (direct financing)
PV of investment
+ direct cost
- unearned income
Unearned interest revenue
Gross investment
- cost of leased property
+ direct cost
amortized over lease
sale lease back defer gain criteria
MAJOR - > 90% defer all gains and amortize..Cap lease
MIDDLE 90>x>10 defer gain up to PV of min lease pay op or capital lease
MINOR <10% no defer gains…operating lease
What are deferred gains classified as on the balance sheet
operating lease - deferred credit
capital lease- asset valuation allowance
