Select Transactions (20-30%) Flashcards
What are the 3 types of leases? What is lease criteria for lessee for Finance lease classification?
ST, Operating, Finance.
Finance for Lessee if 2 extra steps apply:
1) PV of lease pymts+GRV exceed FMV,
2) Probable lessor will receive all lease pymts+GRV.
What is JE for ST lease (Lessee & Lessor)?
Lessee: DR Lease Exp, CR Cash/AP.
Lessor: DR Cash/AR, CR Lease Rev.
What happens when GRV is less at end of lease?
Lessee pays the lessor the difference (only when guaranteed)
How is GRV included in lessee’s lease obligation?
At the beginning of lease and at PV of GRV.
Example: Lease total is $100K, w/PV of $90K. GRV is $10K, w/PV of $9K.
JE: DR Leased Equip. $99K, CR Lease Obligation $99K.
What is JE for Operating lease (Lessee & Lessor)?
Lessee: DR ROU Asset, CR Lease Obligation
Lessor: *keeps asset on books & depreciates over lease term
How do you calculate the initial JE for Operating lease for lessee?
Annual lease pymts X applicable PV factor based on implicit interest rate (will be given).
Example: Leasing equip. 10 yrs, implicit rate 8%. FMV asset is $100K, w/useful life of 20 yrs. Annual lease pymts is $12K. PV factor annuity due for 10 yrs at 8% is 7.25.
12K X 7.25 = 87K (to capitalize)
DR ROU Asset 87K, CR Lease Liab 87K (to capitalize)
DR Lease Liab 12K, CR Cash 12K (first pymt)
87K - 12K = 75K X 8% = 6K (interest #1 at YE #1)
DR Lease Exp 12K, CR ROU Asset 6K, CR Lease Liab 6K
75K - 6K = 69K x 8% = 5,520 (interest #2 at YE #2)…
How do you calculate initial JE for Finance lease for lessee? How do you calculate first payment for Finance lease for lessee?
Similar to operating lease, calculate as annual lease pymt X PV factor based on # of years the lease lasts.
DR ROU Asset, CR Lease Liab (record lease liab)
DR Interest Exp, DR Lease Liab, CR Cash (first pymt)
How do you calculate the initial JE for Finance lease for lessor?
Doing reverse of lessee, take FV of equip. +/- GRV/NGRV and dividing by PV factor.
If PV of minimum lease pymts is > FMV at beginning of lease, then amount of leased asset & obligation will be equal to FV of leased asset.
How is PV of minimum lease pymts computed?
Using the lesser of implicit rate (if known) or the lessee’s incremental borrowing rate.
How are leases under IFRS classified?
all considered finance leases, unless under $5K, then operating lease.
How are leasehold improvements capitalized for leases?
Amortized over shorter of:
1) remaining lease term, or
2) useful life of improvement
What are the FS required for DBP Plans?
Performance up to Employer
- Statement of Net Assets Available for Benefits (as of end of plan year)
- Statement of Changes in Net Assets Available for Benefits (for plan year end)
- Information on actuarial PV of accumulated plan benefits
- Information regarding effects, of certain factors affecting Y-T-Y change in accumulated plan benefits
What are the 5 components of pension expense?
\+ service cost \+ interest cost - expected return on plan assets \+/- amortization of prior service cost \+/- amortization of net gain/loss
SC = what EEs earn in CY IC = PBO at BOY X Discount Rate ERoPA = BOY PA X Expected Rate of Return
What is the formula/calculation for PBO?
\+ Beg PBO \+ service cost \+ interest cost \+ prior service cost - prior service credit \+/- liability gain/loss = End PBO
Increase in PBO = PBO Loss
Decrease in PBS = PBO Gain
What are the FS required for DCP Plans?
Performance up to Employee
- Statement of Net Assets Available for Benefits (as of end of plan year)
- Statement of Changes in Net Assets Available for Benefits (for plan year end)
