Leases - Operating vs Capital Flashcards
1
Q
An Operating Lease
A
recognizes Rent Expense
No Liability is reported until the amount is actually due
2
Q
Sales Type Lease
A
Categorized if from a Manufacturer or Dealer
Normal Profit is recognized immediately
Other profit is recognized as interest over the life of lease
3
Q
Sales Leaseback Agreement
A
Gain is deferred - then reduces depreciation expense over the life of the lease
4
Q
Exception to Sales Leaseback Agreement
A
Leaseback is for a short period of time. (less than 10% of the asset or asset life)
Gain is recognized immediately
5
Q
Expense recognition of operating lease
A
Is the Average amount over the life of the lease
6
Q
What liability does a capital lease report
A
Present value of future cash payments
