Test 3 Flashcards
What is required to be a capital lease?
1) must be NONCANCELABLE
2) and must be one of the next four things:
a) ownership is transferred to the lessee (b) BPO (c) lease term has to be 75% or more of the items useful life (d) present value of the lease payments are 90% or more of the item’s FV
What is included in the present value of the lease payments include:
1) regular lease payment 2) + BPO 3) +guaranteed residual 4) + penalty to fail to renew lease (**DO NOT include executory costs)
How do you calculate depreciation for a capital lease with no BPO or residual?
FV / lease term
How do you calculate depreciation for a capital lease with a BPO?
FV / useful life
How do you calculate depreciation for a lease with a residual value?
FV - residual value / term of the lease
For the direct method, where do we get cash from?
from customers, from interest/dividends
For the direct method, who do we pay cash too?
for suppliers, for employees, for other expenses (ppds, payables), for interest, for income taxes
What increases A/R? Decreases?
Increases: sales
Decreases: cash received, writeoffs
What increases allowance for doubtful acct? Decreases?
Increases: Bad debt expense
Decreases: write-offs
What increases Interest receivable? Decreases?
Increases: Interest revenue
Decreases: cash collections
What increases inventory? Decreases?
Increases: purchases
Decreases: COGS
What increases A/P? Decreases?
Increases: purchases
Decreases: payments
What increases Salaries payable? Decreases?
Increases: salary expenses
Decreases: payments
What increases prepaid expenses? Decreases?
Increases: cash payments
Decreases: expenses
What increases accrued expenses? Decreases?
Increases: Expenses
Decreases: payments
