ACC 302 Final Exam KC (CMU)

Lessor recording lease agreement journals

Beginning of year Dr: Lease Receivable and Cost of Goods Sold Cr: Sales Revenue, Inventory Dr: Cash Cr: Lease Receivable End of year Dr:Lease receivable Cr: Interest Revenue

Lessee recording lease agreement journals

Beginning of year-year 1 Dr: Right of Use Asset Cr: Lease liability Dr: Lease liability Cr: Cash End of year (all years) Dr:Amortization exp./ Lease exp. Cr:Right of Use Asset ( if lease exp. Dr, then Lease liability too) Dr: Interest expense Cr: Lease liability Beginning of year -year 2 Dr: Lease liability Cr: Cash

Service type warranty journal

Dr: Cash Cr: Sales Revenue and Unearned Warranty Rev. Dr: Warranty Exp Cr: Cash, supplies, wages payable

Adjusted service type warranty journal

Dr: Unearned warranty rev Cr: Warranty Rev

Adjusting Assurance type warranty journal

Dr: Warranty Exp. Cr: Warranty Liability

Assurance type warranty journal

Dr: cash/accounts receivable Cr:Sale revenue Dr: Warranty Exp Cr: Cash, supplies, wages payable

Amortization expense calculation

Fair value/ years (*.5 if half year)

Both a guaranteed and an unguaranteed residual value affect the lessee's computation of amounts capitalized as a leased asset.

False

If a lease does not transfer control of the asset over the lease term, the lessor will generally account for the lease as a sales-type lease.

False

In an operating lease, the lessee reports both interest expense and amortization expense on the income statement.

False

Under an operating lease, the lessor records each rental receipt as part interest revenue and part rental revenue.

False

COGS calculation

Inventory cost - unguaranteed residual value

Annual lease payments calculation

Present value of lease payment = Fair value of the asset PMT* ((1-(1/1+%)^x)/% (1+%) =Y PMT*(above %)=Y PMT= Y/ (above %)

Sales revenue calculation

Present value of minimum lease payment + guaranteed residual value

Lease receivable calculation

Present value of minimum lease payment + residual value

Finance for lesse =

Sales-type for lessor

Lease expense amortization schedule

Start with the third line of the lease liability schedule and go to the end. the last line is just the lease expense and the amortization of the assets.

Finance lease

T.T. BPO 75/90 A Only need to do one

If a leased equipment has no alternative use to the lessor, the lessor will generally account for the lease as a sales-type lease.

True

If the difference between the Construction in Process and the Billings on Construction in Process account balances is a credit balance, the difference is reported as a current liability.

True

If the difference between the Construction in Process and the Billings on Construction in Process account balances is a debit balance, the difference is reported as a current asset

True

If the lease term is 75% or more of the economic life, lessee would classify the lease transaction as finance lease.

True

In a consignment transaction, the consignor continues to own the goods until they are sold. Thus, the goods appear as inventory in the accounting records of the consignor, not the consignee.

True

In an operating lease, the lessee reports only lease expense on the income statement.

True

The fifth step in the process for revenue recognition is to recognize revenue when each performance obligation is satisfied.

True

The first step in the process for revenue recognition is to identify the contract with customers.

True

The fourth step in the process for revenue recognition is to allocate transaction price to the separate performance obligations.

True

The second step in the process for revenue recognition is to identify the separate and distinct performance obligations in the contract.

True

The third step in the process for revenue recognition is to determine the transaction price.

True

Under an operating lease, the lessor records each rental receipt as lease revenue. At the end of each year during the term of the lease, lessor recognizes depreciation expense associated with the leased asset.

True

When a company has an obligation or right to repurchase an asset for an amount greater than or equal to its selling price, the transaction should be treated as a financing transaction.

True

When a lease has an unguaranteed residual value, the lessor reduces sales revenue and cost of goods sold by the present value of the unguaranteed residual value.

True

When bargain purchase option exists in a lease contract, minimum lease payments would be increased by the present value of the option price

True

Percentage of completion calculation

cost incurred /(cost incurred+additional costs)=% %* billings to date of following year- cost incurred

Transaction price allocations

total cost (standalone value/Total standalone value)

Total standalone fair value calculation

total of all standalone values added together

Record amortization expense

{PMT* ((1-(1/1+%)^x)/% (1+%)}/ Years

Lease liability amortization schedule

{PMT* ((1-(1/1+%)^x)/% (1+%)}= Lease Liability annual rental payments= annual payment ARP- Interest= reduction of liability pervious LL-Reduction = new lease liability Lease liability* % = interest expense First line has only lease liability Second line only has annual payments which s also the reduction and the first lease liability - reduction