chapter 21

chapter 21 - CHAPTER 21 21 ACCOUNTING FOR LEASES...

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Chapter 21-1 C H A P T E R C H A P T E R 21 21 ACCOUNTING FOR LEASES ACCOUNTING FOR LEASES Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield
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Chapter 21-2 1. Explain the nature, economic substance, and advantages of lease transactions. 2. Describe the accounting criteria and procedures for capitalizing leases by the lessee. 3. Contrast the operating and capitalization methods of recording leases. 4. Identify the classifications of leases for the lessor. 5. Describe the lessor’s accounting for direct-financing leases. 6. Identify special features of lease arrangements that cause unique accounting problems. 7. Describe the effect of residual values, guaranteed and unguaranteed, on lease accounting. 8. Describe the lessor’s accounting for sales-type leases. 9. List the disclosure requirements for leases. Learning Objectives Learning Objectives
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Chapter 21-3 Largest group of leased equipment involves: Information technology Transportation (trucks, aircraft, rail) Construction Agriculture LO 1 Explain the nature, economic substance, and advantages of lease transactions. A lease is a contractual agreement between a lessor and a lessee, that gives the lessee the right to use specific property, owned by the lessor , for a specified period of time. The Leasing Environment
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Chapter 21-4 Three general categories: Banks. Captive leasing companies. Independents. LO 1 Explain the nature, economic substance, and advantages of lease transactions. Who Are the Players? The Leasing Environment
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Chapter 21-5 1. 100% Financing at Fixed Rates. 2. Protection Against Obsolescence. 3. Flexibility. 4. Less Costly Financing. 5. Tax Advantages. 6. Off-Balance-Sheet Financing. The Leasing Environment LO 1 Explain the nature, economic substance, and advantages of lease transactions. Advantages of Leasing
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Chapter 21-6 Capitalize a lease that transfers substantially all of the benefits and risks of property ownership, provided the lease is noncancelable. Leases that do not transfer substantially all the benefits and risks of ownership are operating leases. The Leasing Environment LO 1 Explain the nature, economic substance, and advantages of lease transactions. Conceptual Nature of a Lease
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Chapter 21-7 Operating Lease Capital Lease Journal Entry: Rent expense xxx Cash xxx Journal Entry: Leased equipment xxx Lease liability xxx The issue of how to report leases is the case of substance versus form. Although technically legal title may not pass, the benefits from the use of the property do. A lease that transfers substantially all of the benefits and risks of property ownership should be capitalized (only noncancellable leases may be capitalized). The Leasing Environment LO 1 Explain the nature, economic substance, and advantages of lease transactions.
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Chapter 21-8 If the lessee capitalizes a lease, the lessee records an asset and a liability generally equal to the present value of the rental payments. Records depreciation on the leased asset.
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This note was uploaded on 02/04/2011 for the course ACC 630 taught by Professor Mcarthy during the Spring '09 term at St. John's.

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chapter 21 - CHAPTER 21 21 ACCOUNTING FOR LEASES...

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