Leases, Pensions, Equity, Cash Flows

Question 1

Lessee Capital Lease 90% Rule

Answer 1

present value is greater or equal to 90% of the FV of the property
*Do this test last

Question 2

Lessee Capital Lease 75% Rule

Answer 2

Lease term is greater than or equal to 75% of the assets economic life

Question 3

Depreciating Capital Lease Asset

Answer 3

Capitalized Lease Asset
- Salvage Value
=Depreciable Base / Periods of Benefit
=Depreciation Expense (per period)

Question 4

Lessor Accounting: Gross Investment

Answer 4

Lease Payments

+Unguaranteed Residual Value

Question 5

Lessor Accounting: Net Investment

Answer 5

Lease Payments
+Unguaranteed Residual Value
= Gross Investment
x PV Factor

Question 6

Lessor Accounting: Unearned Interest Revenue

Answer 6

Gross Investment

- Net Investment

Question 7

Lessor Accounting: COGS

Answer 7

Cost of Asset

- PV unguaranteed residual value

Question 8

Rule for Sales Type Leave Formula

Answer 8

Cost
+Profit
=Present Value=Selling Price=FV