LEASES Flashcards
What is the J/E to record a finance lease for the lessor?
Dr Lease Receivable
Cr Asset
OR
Dr Lease Receivable
Cr Sales
Dr COGS
Cr Inventory
How is the lessor’s initial recognition amount for a finance lease calculated?
Net Investment. I.e. PV of MLP and the PV of UGRV.
How is MLP Receivable accrued to the lessor calculated?
$ Payments made by lessee over term
+ BPO
+ GRV
= Total
What is the J/E for the lessor’s subsequent finance lease recognition?
Dr Cash
Cr Interest Income
Cr Lease Receivable
How would the recognition of operating lease income look for the lessor?
Dr Cash
Cr Lease Income
Dr/Cr Unearned Lease Income (if an initial payment)
How are initial direct costs (IDC) incurred by the lessor accounted for in an operating lease transaction?
IDC’s are added to the carrying amount of the lease asset and depreciated over the term of the lease.
Dr Asset
Cr Cash
Dr IDC Expense
Cr Asset
How is the initial recognition amount for a finance lease calculated?
The lower of PV of MLP and fair value.
Add initial direct costs (legal fees) to the amount recognised.
Dr Lease Asset
Cr Lease Liability
Formula used to verify whether or not the interest rate used is equal to the interest rate implicit in the lease?
PV of MLP + PV of UGRV = FV + IDC
What is the J/E used to recognise finance lease expense for the lessee?
Dr Lease Expense
Dr Lease Liability
Cr Cash
Dr Depreciation
Cr Accumulated Depreciation
(The lower of PV of MLP and FV / life)
How do you calculate MLP for the lessee?
$ Payments to the lessor
+ BPO
+ GRV
= Total
If classified as an operating lease by the lessee then…
Lease payments shall be recognised as an expense on a SL basis over the lease term.
I.e. $ payments to lessee / lease term
J/E
Dr Rental Expense or Op Lease Expense
Cr Cash
Cr Prepaid Rent Expense
Research costs are ________, and development costs are _________.
Expensed, capitalised.
