Deck 7 Flashcards Preview

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Flashcards in Deck 7 Deck (20):
1

IN an operating sales-type lease, how will COGS compare to historical cost of the asset being sold?

COGS will be less than historical cost

2

Cost (capitalized amount) of equipment in a lease will have two components

Present value of minimum lease payments plus PV of purchase option

3

Refundable security deposits are treated as

Asset for lessee and liability for lessor

4

Journal entry for capital/finance lease

Dr. leased asset and CR. lease liability

5

Sales-type lease

2 profits; FV of leased property differs from cost or carrying amount of lessor (Gain on sale and interest income)

6

Direct-finance lease

1 profit; FV of leased property is the same as cost or carrying amount of lessor (Interest income)

7

Depreciation expense for capitalized lease =

(Capitalized lease asset - salvage value)/period of benefit

8

Period of benefit (depreciable life); IFRS vs. gaap

OW: use asset life; NS: use lease life....IFRS: use shorter of two

9

Profit on sale for sales-type lease =

Selling price - equipment cost

10

What do you do when lease payment is paid at beginning of the year?

Record it all as principal with no interest expense in first year (would record interest expense if payment made at end of year)

11

Deferral rules for leases

If PV of rent payments is >10% of FV, then defer the gain

12

Exchanged convertible bond for C/S, what account is affected

Increase in APIC

13

When a bond is purchased at a discount, the CV is

Less than the FV

14

Ending carrying amount of a bond issued at a discount

Beginning carrying amount (face amount) + discount amortization

15

Bond discount occurs when

Effective interest rate > stated rate; interest expense will then be greater than cash payment

16

Discount amortized =

Interest revenue - interest receivable

17

Effective rate

Bond premium

18

Difference between discount amortization and premium amortization and how it effects interest expense?

Discount: increases interest expense; premium: decreases interest expense

19

Gain/loss on extinguishment of debt =

Reacquisition price - net carrying value (face value - unamortized discount/premium - unamortized bond issuance costs)

20

Bond interest paid =

Face amount x coupon rate