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