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Flashcards in Deck 13 Deck (20):
1

Another way to calculate ordinary annuity if only the annuity due payment is given:

Annuity due - 1 = ordinary annuity

2

Amortization of leasehold improvements should be over the shorter of:

Life of the improvements or the remaining life of the lease

3

With a capital lease, the lessee should amortize the leased property over the:

Economic life of the asset when there is a bargain purchase option

4

Nonrefundable security deposits

Deferred by the lessor and capitalized by the lessee

5

Refundable security deposits

Treat as a receivable by the lessee and a liability by the lessor until the deposit is refunded to the lessee

6

Income from leased asset =

Monthly rentals + lease bonus amortization - depreciation

7

Capital lease criteria for lessee (OWNS)

Ownership transfers at end of lease; written option for bargain purchase; 90% of leased property FV

8

Sales-type/direct financing type criteria for lessor (LUC)

Lessee "owns" the leased property; Uncertainties regarding costs do not exist; Collectibility of the payments is reasonably predictable (Must meet all 3)

9

Sales - type lease:

FV of leased property differs from the carrying amount; 2 profits: gain on sale and interest income

10

Direct financing lease:

FV is the same as the carrying amount; 1 profit: interest income

11

What is included in the capitalized amount?

Required payments (PV of annuity due or ordinary annuity), PV of $1 for both the BPO and guaranteed residual value

12

Period of benefit (depreciable life) - US GAAP:

OW: Over the assets life; NS: depreciate over lease life

13

Period of benefit (depreciable life) - IFRS:

Shorter of lease term and useful life

14

Gross investment for lessor accounting =

Lease payment + unguaranteed residual value

15

Net investment for lessor accounting =

Gross investment x PV

16

Unearned interest revenue for lessor accounting =

Gross investment - net investment

17

What type of lessor lease is COGS recorded?

Sales-type lease (not direct financing)

18

Under a sales-type lease, Cost + profit =

Present value = selling price = FV

19

The lease will be recorded as both an asset and liability at the lesser of:

FV of the asset or the cost to lease the asset (PV of minimum lease payments)

20

An entity's revenue may result from a decrease in a:

Liability from primary operations