4 3 3 4 0 rounding records each rental receipt as

Info icon This preview shows pages 21–30. Sign up to view the full content.

View Full Document Right Arrow Icon
$       4 3 ,3 4 0 $    0 * * rounding * *
Image of page 21

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 15-22 Records each rental receipt as rental expense.  Does not depreciate the asset. Any prepaid or noneconomic payment patters are straight-lined. Leasehold improvements are depreciated over the lesser of useful life  or lease term.   Operating Method (Lessee) Accounting by the Lessee Accounting by the Lessee Accounting by the Lessee Accounting by the Lessee
Image of page 22
Chapter 15-23 1. Interest Revenue. 2. Tax Incentives. 3. High Residual Value. Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor Benefits to the Lessor
Image of page 23

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 15-24 A lessor determines the amount of the rental, based on the rate of return  needed to justify leasing the asset. If a residual value is involved (whether guaranteed or not), the company  would not have to recover as much from the lease payments Economics of Leasing Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor
Image of page 24
Chapter 15-25 (Computation of Rental) Morgan Leasing Company signs an agreement on  January 1, 2007, to lease equipment to Cole Company. The following information relates  to this agreement. 1. The term of the noncancelable lease is 6 years with no renewal option. The equipment has an  estimated economic life of 6 years. 2. The cost of the asset to the lessor is $245,000. The fair value of the asset at January 1, 2007,  is $245,000. 3. The asset will revert to the lessor at the end of the lease term at which time the asset is  expected to have a residual value of $43,622, none of which is guaranteed. 4. The agreement requires annual rental payments, beg.  Jan. 1, 2007. 5. Collectibility of the lease payments is reasonably predictable. There are no important  uncertainties surrounding the amount of costs yet to be incurred by the lessor. Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor
Image of page 25

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 15-26 Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor (Computation of Rental) Assuming the lessor desires a 10% rate of return  on its investment, calculate the amount of the annual rental payment required. 
Image of page 26
Chapter 15-27 a. Operating leases. b. Direct-financing leases. c. Sales-type leases. Classification of Leases by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor
Image of page 27

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 15-28 Classification of Leases by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor If any group 1 conditions are met, plus all group 2 conditions are met, then the lease is a  direct financing or a sales type lease.  A sales-type lease involves a manufacturer’s or  dealer’s profit, and a direct-financing lease does not.
Image of page 28
Chapter 15-29 Classification of Leases by the Lessor Accounting by the Lessor Accounting by the Lessor Accounting by the Lessor
Image of page 29

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 30
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern