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3113-Ch21 - ACG 3113 ACG Chapter 21 Leases Prepared by...

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ACG 3113 ACG 3113 Chapter 21 Chapter 21 Leases Leases © Prepared by: Deanna O. Burgess, PhD, CPA Florida Gulf Coast University
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ACG 3113 Slide 2 3 Leases borrow assets and pay for  them over time. Two kinds of leases:  Capital  leases transfer the risk and benefits  of ownership and operating leases  do not. Overview Overview
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ACG 3113 Slide 3 4 The discussion of this chapter is  organized as follows: °  The Big Picture on Leases °  Specifics on Accounting for Leases °  Classification and Disclosure Overview Overview
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ACG 3113 Slide 4 5 The Big The Big Picture Picture note the B/S and I/S impact and the timing of each Accounting Entries Lessee Lessor Capital Observations: Observations: Operating Observations: Observations:
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ACG 3113 Slide 5 6 Step 1: Capital or Operating Lease The lessee and lessor may not account for the lease the same way Step 2: Lease Payment (always use lessor’s rate) Step 3: Initial Entry (watch which rate you use) Step 4: Interest Entry Step 5: Depreciation Entry Step 6: Lease Payment/Receipt Entry SPECIFICS ON LEASES Accounting Steps
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ACG 3113 Slide 6 7 SPECIFICS ON LEASES Step 1: Determine if Capital or Operating Cap ital Lease Determ ination Lessee (must m eet one of Group I criterion) Lessor (must m eet one of Group I criterion and both of Group II criterion) Group I Criterion: Group I Criterion: 1 . Lease transfers ownersh ip of property . 1 .
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