ACCTG 472 Exam 3
lease in considered a "short term lease" if lease.. 1) 2)
1) has a lease term of 12 months or less AND 2) doesn't contain a purchase option that the lessee is reasonably certain to exercise, which would extend the term beyond 12 months
the lessee should amortize the asset's useful life if 1) 2)
1) ownership transfers OR 2) exercise of a purchase option is reasonably certain
How is a lessor's receipt of payment recorded on an operating asset?
all (interest, lease) recorded as lease revenue
guaranteed residual value
commitment by the lessee that the lessor will recover a specified residual value at the end of the lease term
under the shortcut method, lessee has the option of..
not recording asset or liability (lease payable), and just record lease payments as rent expense
how is lease expenses recorded by the lessee in an OPERATING lease?
on a straight-line basis
In an ____________ lease, recording lease expense should reflect straight line rental of the asset during the lease term
operating
What kind of lease is more true to the nature of a rental agreement?
operating lease
sale-leaseback transaction
owner of an asset sells it and immediately leases it back from the new owner
the right-of-use asset is amortized straight-line unless the lessee's _______ of using the asset is different
pattern
intent to determine whether usual risks and rewards of ownership are transferred is characteristic of _______ GAAP
preexisting
classification of operating vs CAPITAL is a characteristic of ________ GAAP & classification of operating/OR FINANCE vs SALES TYPE is a characteristic of _________ GAAP
preexisting; new
initial direct costs incurred by lessor in a sales-type lease with no selling profit is..
deferred and expensed over the lease term by increasing the lease receivable
initial direct costs incurred by lessor in a operating lease is..
deferred and expensed over the lease term typically on a straight-line basis
in an operating lease, the lessee reports lease _______ and the lessor reports lease ______, on a straight line basis
expense; revenue
initial direct costs incurred by lessor in a sales-type lease with selling profit is..
expensed at the beginning of the lease
the _______ rate is the desired rate of return of the lessor
implicit
when lessor's implicit rate is unknown, which rate should be used to calculate the PV of the lease payments for the lessee?
lessee's incremental borrowing rate
in an operating asset, who reports the leased asset on their balance sheet?
lessor
the _______ must disclose its net investment in the lease
lessor
in an operating lease, the ______ records no asset or liability at the inception of the lease and the _______ records both
lessor; lessee
intent to determine whether lessee obtains substantially all of the remaining benefit of the asset is characteristic of ________ GAAP
new
Selling profit exists in a sales-type lease when the..
present value of the lease payments is greater than the cost of the asset
what's included in the lessor's gross investment in the lease?
residual value, periodic lease payments
fundamental difference in lease classification b/w lessor and lessee under PREEXISTING GAAP related to..
revenue recognition
which type of lease does the lessor record at the INCEPTION of the lease?
sales-type
what is a nonlease component of a lease agreement recorded separately from the lease payments?
when the amount represents transfer of a good or service to the lessee