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Unformatted text preview: ssor likely assigns a higher interest rate in the calculation if the residual value is not guaranteed higher lease payment 2. Accounting implications Guaranteed residual value For the lessee Inception: calculation Included of leased asset/liability Calculation of Excluded in the numerator depreciation exp. At the end of the lease Both the net value of the leased asset (lease asset minus term accumulated dep.) and the lease liability (including interest payable) have a balance of the guaranteed residual value Transfer of the asset Close leased asset and lease liability If residual value is lower than expected PV (residual value) is included in COGS and sales At the end of the lease The book value of the lease receivable has a balance of term residual value receive the asset Transfer asset from lease receivable and interest revenue (with a balance of residual value) to asset If residual value is lower than expected Not excluded Both accounts have zero balance same Pay for the difference to settle the lease and record loss Loss on capital lease $xx Cash xx For the lessor Inception – calculation Included of lease receivable Lease receivable = PV(lease payment) + PV (residual value) if sales type lease Unguaranteed Not included Use the received cash to balance the entry nothing same Not included same same record loss...
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This note was uploaded on 09/11/2012 for the course ACCT 302 taught by Professor Staff during the Spring '08 term at Wisconsin.
- Spring '08