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20 Cards in this Set
- Front
- Back
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An apartment lease would be a(n) _________lease |
operating |
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A direct financing or sales type lease would be considered a _________ lease |
capital |
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A capital lease is different from an installment not because it's _____________. |
non cancellable |
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A lease is a _________ ___________. |
contractual agreement |
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To figure lease payments on a capital lease for the lessor's books: |
Find PV$1 for N & I (using the lessor's rate of return). Divide the fair value of asset by the PV$1 to calculate the payment amount. |
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On the lease amortization schedule each payment includes interest on the outstanding balance at the effective rate. The remaining portion of the payment is |
a reduction of the outstanding balance |
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Criteria for classification of a capital lease is one or more of: |
The agreement specifies that ownership of the asset transfers to the lessee; It contains a bargain purchase option; lease term is equal to 75% or more of the expected economic life of the asset; the PV of the "minimum lease payments" is equal to or greater than 90% of the FV of the asset. |
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Additional conditions for classification as a capital lease by the lessor: |
The collectibility of the lease payments must be reasonable predictable & if any costs to the lessor have yet to be incurred, they are reasonably predictable. |
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At the end of each year the lessor retains the asset on the books and accordingly records |
depreciation on the asset. |
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A ___________ occurs when the initial payment (or maybe several payments) is waived. |
rent abatement |
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A refundable security deposit is recorded as a ____________ receivable (by the lessee) and __________ (by the lessor) unless it is not expected to be returned. |
long term; liability |
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At the beginning of the year, the rent payments are ____________ to the lessee and _____________ to the lessor |
prepaid rent; deferred rent |
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The cost of a leasehold improvement is depreciated over its ________________ to the lessee. |
useful life |
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A leased asset is recorded by the lessee at the PV of the minimum lease payments or the asset's fair value, whichever is lower. This is an example of ___________. |
Conservatism |
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Interest is a function of _________. |
time |
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On a sales-type lease, additional profit exists when the fair value of the asset (usually the PV of the minimum lease payments or selling price) __________ the cost or book value of the asset sold. |
exceeds |
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Advance payments are made at the ____________ of the lease and are recorded as ___________. |
Inception; prepaid rent |
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Advance payments are allocated to ______________ or _________ over the lease term |
rent expense; rent revenue |
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Installment payments have some uncertainty of _____________. |
collectibility |
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Leasehold improvement has _________ over time |
value |
