operating leases

Question 1

operating lease

Answer 1

does not convey most of the benefits and costs of owning the asset

Question 2

capital lease

Answer 2

lessee obtains most or all the benefits and costs of owning the asset

Question 3

if one of these 4 criteria is met then its a capital lease

Answer 3

ownership transfers at end of lease term
bpo
lease term>= of 75% leased asset life
pv of lease payments>=90% of cash price of leased asset

Question 4

annual rent expense or revenue under a operating lease

Answer 4

total rentals less damage deposits and amounts paid for other services/lease term in years

Question 5

leasehold improvements are capitalized and ______

Answer 5

amortized over the shorter of remaining lease term or useful life of asset

Question 6

operating lease example
11/x1 lease is signed
20k bonus to be paid by lessee to secure lease
annual rental due jan 31 each year
first and last year rental payment is paid at signing
10k damage deposit is due at signing
lease term ends 12/31/x5(5 yr term)

Answer 6

(20k+4.5*30k)/5=31k rental rev or expense

rental expense 31k
cash 31k

the damage deposit is a concurrent receivable for lessee and liability lessor