Chap 012

Chapter 12
Financial Reporting for Leases
Assigned problem or case:
Problem or case title:
Tab
P12-3
Accounting for lessees' capital leases
P12-3
P12-4
P12-4
P12-9
Recording capital lease for lessee and comparing to operating lease treatment
P12-9
P12-10
Recording lessors' direct financing lease
P12-10
P12-12
Accounting for monthly rental payments
P12-12
P12-13
Comparing financial statement effects of capital and operating leases
P12-13
P12-14
Comparing financial statement effects of direct financing and operating leases
P12-17
Visualizing the asset-liability relationship over time for a capital lease
P12-14
P12-17 BOY
P12-17 EOY
C12-1
AMR Corporation: Constructively capitalizing operating leases
C12-1
C12-4
Walgreens: Lessee reporting and constructively capitalizing operating leases
C12-4
P12-3
Model Inputs :
Summary Statistics:
Payment
$1.00
Discount Rate
1.0%
Years to Maturity
Total Lease Expense
$4.25
Total Depreciation Expense
$5.90
Total Interest Expense
($1.65)
Amortization Table
Date
Year
Payment
Interest
Reduction
Ending
Straight
Depreciated
on Unpaid
of Lease
Lease
Line
Carrying
Obligation
Obligation
Obligation
Depreciation
Value
Jan 1
2011
$0.00
$0.00
$0.00
$5.90
Dec 31
2011
$1.00
$0.06
$0.94
4.96
$5.90
$0.00
Dec 31
2012
1.00
0.05
$0.95
4.01
$0.00
$0.00
Dec 31
2013
1.00
0.04
$0.96
3.05
$0.00
$0.00
Dec 31
2014
1.00
0.03
$0.97
2.08
$0.00
$0.00
Dec 31
2015
1.00
(1.83)
$2.83
(0.75)
$0.00
$0.00
Lease Obligation vs. Book Value of Asset

$6
$5
$4
$3
$5.90
$2
$1
$0
2011
2012
2013
2014
Period (12/31)
Lease Obligation
Book value of asset
2015
P12-4

2.00
Model Inputs :
Summary Statistics:
Payment
$1.00
Discount Rate
Total Lease expense
1.0%
Years to Maturity
$4.62
Total Depreciation expense
Total Interest expense
Amortization Table
Payment
Interest
Reduction
Ending
Straight
Depreciated
on Unpaid
of Lease
Lease
Line
Carrying
Obligation
Obligation
Depreciation
Value
Obligation
Payment
Date
Year
Jan 1
2011
$0.00
$1.00
$1.00
$0.00
$0.00
Jan 1
2012
$0.00
$1.00
$1.00
($1.00)
$1.00
$0.00
Jan 1
2013
($0.01)
$1.00
$1.01
($2.01)
$1.00
($1.00)
Jan 1
2014
($0.02)
$1.00
$1.02
($3.03)
$1.00
($2.00)
Jan 1
2015
($0.31)
$1.00
$1.31
($4.34)
$1.00
($3.00)
Jan 1
2016
($0.04)
$0.00
$0.04
($4.38)
$1.00
($4.00)
$5.00
($0.38)
$1.00
$1
$1
$1
$1
$0
$0
$0
2011
2012
2013
2014
Period (as of January 2)

Lease obligation
Book value of Asset
2015
2016
P12-9
Recording capital lease for lessee and comparing to operating lease treatment
2.00
Requirement A2: Amortization table

Model Inputs :
Payment
$1.00
Discount Rate
1.0%
Years to maturity
Amortization Table
Lease
Payment
Interest
Principal
Obligation
Expense
Reduction
Balance
Date
Year
7/1
2011
7/1
2011
$1.00
$0.00
$1.00
7/1
2012
1.00
1.00
(1.00)
7/1
2013
1.00
1.00
(2.00)
7/1
2014
1.00
1.00
(3.00)
7/1
2015
1.00
1.00
(4.00)
7/1
2016
1.00
1.00
(5.00)
7/1
2017
1.00
1.00
(6.00)
7/1
2018
1.00
1.00
(6.00)
$1.00
Requirement B2 - Financial statement effects - capital lease

Balance Sheet
Assets
31-Dec
2011
Lease asset
Accumulated Amortization
2012
$1.00
$1.00
($0.50)
($1.50)
Asset Effect
0.50
(0.50)
Liabilities
Lease obligation - current
1.00
1.00
(1.00)
(2.00)
(1.00)
$0.50
$0.50
($0.50)
($1.00)
Lease obligation - Long term

Liability Effect
Net Effect (asset effect less the liability effect)
Income Statement
Depreciation expense
Interest expense
($0.50)
($1.00)
Requirement B3 - Financial statement effects - operating lease

Balance Sheet
Assets
31-Dec
2011
Prepaid rent
2012
$0.50
$0.50
Asset Effect
Liabilities
-
$0.50
$0.50
($0.50)
($1.00)
Difference in net balance sheet effect
$0.00
$0.00
Difference in income statement effect
$0.00
$0.00
Liability Effect
Net Effect
Income Statement
Rent expense
P12-10
Recording lessor's direct financing lease
Model Inputs :
Payment
Summary Statistics:
$1.00
Discount Rate
Total Lease Payments Receivable
1.0%
Years to maturity
$2.06
Net Investment
$12.92
Unearned Interest Revenue
($10.86)
Amortization Table
Receipt
Interest
Net
on Net
Investment
Net
Investment
Recovery
Investment
Date
Year
Jan 1
2011
Jan 1
2011
$1.00
$0.00
$1.00
11.92
Jan 1
2012
1.00
0.12
0.88
11.04
Jan 1
2013
1.00
0.11
0.89
10.15
Jan 1
2014
1.00
0.10
0.90
9.25
Jan 1
2015
1.00
0.09
0.91
8.34
Jan 1
2016
1.00
0.08
0.92
7.42
Jan 1
2017
1.00
0.07
0.93
6.49
Jan 1
2018
1.00
(11.43)
12.43
(5.94)
$12.92
P12-12 Accounting for monthly rental payments

Inputs
Monthly interest rate
1%
Term
Fair value
Cost
Guaranteed residual
Number of computers
Requirement 1: Monthly payment

Monthly Lease Payments
$0.01
For 20 machines
$0.20
Requirement 4: Amortization table

MONTHLY
REDUCTION
PAYMENT
INTEREST
LEASE
IN
RECEIVABLE
DATE
INCOME
PAYMENTS
RECEIVABLE
BALANCE
09/01/11
09/01/11
$1.00
$
$0.20
10/01/11
0.01
11/01/11
0.20
0.80
0.20
0.19
0.61
0.01
0.20
0.19
0.42
12/01/11
0.00
0.20
0.20
0.22
01/01/12
0.00
0.20
0.20
0.02
02/01/12
0.00
0.20
0.20
(0.18)
03/01/12
0.00
0.20
0.20
(0.38)
04/01/12
0.00
0.20
0.20
(0.58)
05/01/12
(0.01)
0.20
0.21
(0.79)
06/01/12
(0.01)
0.20
0.21
(1.00)
07/01/12
(0.01)
0.20
0.21
(1.21)
08/01/12
(0.01)
0.20
0.21
(1.42)
09/01/12
(0.01)
0.20
0.21
(1.63)
10/01/12
(0.02)
0.20
0.22
(1.85)
11/01/12
(0.02)
0.20
0.22
(2.07) 2012 reductions
12/01/12
(0.02)
0.20
0.22
(2.29) $
01/01/13
(0.02)
0.20
0.22
(2.51)
02/01/13
(0.03)
0.20
0.23
(2.74)
03/01/13
(0.03)
0.20
0.23
(2.97)
04/01/13
(0.03)
0.20
0.23
(3.20)
05/01/13
(0.03)
0.20
0.23
(3.43)
06/01/13
(0.03)
0.20
0.23
(3.66)
07/01/13
(0.04)
0.20
0.24
(3.90)
08/01/13
(0.04)
0.20
0.24
(4.14)
09/01/13
(0.04)
0.20
0.24
(4.38)
10/01/13
(0.04)
0.20
0.24
(4.62)
11/01/13
(0.05)
0.20
0.25
(4.87)
12/01/13
(0.05)
0.20
0.25
(5.12)
01/01/14
(0.05)
0.20
0.25
(5.37)
02/01/14
(0.05)
0.20
0.25
(5.62)
03/01/14
(0.06)
0.20
0.26
(5.88)
04/01/14
(0.06)
0.20
0.26
(6.14)
05/01/14
(0.06)
0.20
0.26
(6.40)
06/01/14
(0.06)
0.20
0.26
(6.66)
07/01/14
(0.07)
0.20
0.27
(6.93)
08/01/14
(0.07)
0.20
0.27
(7.20)
09/01/14
(2.32) *
0.00
2.32
(9.52)
(3.32)
7.20
10.52
*Rounded.
2.51
P12-13
Comparing financial statement effects of capital and operating leases
Model Inputs :
Summary Statistics:
Payment
$1.00
Discount Rate
Total Lease Expense
1.0%
Years to Maturity
($7.14)
Total Amortization Expense
$9.98
($17.12)
Amortization Table
Date
Year
Payment
Interest
Starting
Reduction
Ending
Straight
Depreciated
Income Statement
on Unpaid
Lease
of Lease
Lease
Line
Carrying
Effect, Capital Lease
Obligation
Obligation
Obligation
Obligation
Depreciation
Value
(Depreciation + Interest)
Income Statement
Effect,
Operating Lease
Jan 1
2011
$0.00
$0.00
$10.00
$0.00
$10.00
$0.00
$9.98
$0.00
$0.00
Dec 31
2011
$1.00
$0.10
10.00
$0.90
9.10
$9.98
$10.08
$1.00
Dec 31
2012
$1.00
0.09
9.10
0.91
8.19
9.98
(9.98)
10.07
1.00
Dec 31
2013
$1.00
0.08
8.19
0.92
7.27
9.98
(19.96)
10.06
1.00
Dec 31
2014
$1.00
0.07
7.27
0.93
6.34
9.98
(29.95)
10.05
1.00
Dec 31
2015
$1.00
0.06
6.34
0.94
5.40
9.98
(39.93)
10.04
1.00
Dec 31
2016
$1.00
0.05
5.40
0.95
4.45
9.98
(49.91)
10.03
1.00
Dec 31
2017
$1.00
0.04
4.45
0.96
3.49
9.98
(59.89)
10.02
1.00
Dec 31
2018
$1.00
(17.61)
3.49
18.61
(15.12)
9.98
(69.87)
(7.63)
1.00
Income Statement Effect, Capital vs. Operating Lease

$12
$10
$8
$6
$4
$2
$0
1
Period
Expense, Capital Lease
Expense, Operating Lease
P12-14
Comparing financial statement effects of direct financing and operating leases
Model Inputs:
Summary Statistics:
Payment
$1.00
Discount Rate
1.0%
Years to Maturity
Total Lease Payments Receivable
$5.39
Net Investment
$3.92
Unearned Interest Revenue
$1.46
AmortizationTable
a
Starting
Date
Year
Ending
Income,
Asset Balance,
Cash
Interest
Principal
Principal
Principal
Annual
Operating Method
Operating Method
Payment
Income
Balance
Reduction
Balance
Depreciation
(c-h)
(Note 1)
Jan 1
2011
$0.00
$0.00
$3.92
$0.00
$3.92
$0.00
$0.00
Dec 31
2011
$1.00
$0.04
$3.92
$0.96
$2.96
$3.92
($2.92)
$0.00
Dec 31
2012
$1.00
$0.03
$2.96
$0.97
$1.99
$3.92
($2.92)
($3.92)
Dec 31
2013
$1.00
$0.02
$1.99
$0.98
$1.01
$3.92
($2.92)
($7.85)
Dec 31
2014
$1.00
$0.01
$1.01
$0.99
$0.02
$3.92
($2.92)
($11.77)
Dec 31
2015
$1.00
$1.37
$0.02
($0.37)
$0.39
$3.92
($2.92)
($15.69)
Note 1: Equal to the starting principal balance less annual depreciation charges.
Direct Financing Method Versus Operating Method:

Income Statement Comparison
$2
$1
$1
$1
$1
$1
$0
$0
$0
$3.92
$0
1
Period
Direct Financing Income
Operating Method Income
Direct Financing Method Versus Operating Method:

Balance Sheet Comparison
$4
$3
$3
$2
$2
$1
$1
$0
1
Period
Asset Balance, Direct Financing
Asset Balance, Operating Method
P12-17 BOY
Beginning of Year Payment Model

Model Inputs:
Summary Statistics:
Payment
$1.00
Discount Rate
1.0%
Years to Maturity (0-30)
Total Lease Expense
$1.00
$1.00
$0.00
See chart on right

Amortization Table
Date
Year
Payment
Interest
Starting
Reduction
Ending
Straight
on Unpaid
Lease
of Lease
Lease
Line
Obligation
Obligation
Obligation
Obligation
Amortization
Depreciated
Carrying
Value
Jan 1
2011
$1.00
$0.00
$1.00
$1.00
$0.00
Dec 31
2011
$0.00
$0.00
$0.00
$0.00
$0.00
$1.00
$1.00
$0.00
Jan 1
2012
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2012
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2013
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2013
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2014
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2014
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2015
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2015
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2016
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2016
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2017
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2017
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2018
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2018
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2019
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2019
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Jan 1
2020
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2020
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
10
Jan 1
2021
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
10
Dec 31
2021
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
11
Jan 1
2022
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
11
Dec 31
2022
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
12
Jan 1
2023
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
12
Dec 31
2023
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
13
Jan 1
2024
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
13
Dec 31
2024
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
14
Jan 1
2025
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
14
Dec 31
2025
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
15
Jan 1
2026
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
15
Dec 31
2026
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
16
Jan 1
2027
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
16
Dec 31
2027
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
17
Jan 1
2028
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
17
Dec 31
2028
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
18
Jan 1
2029
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
18
Dec 31
2029
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
19
Jan 1
2030
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
19
Dec 31
2030
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
20
Jan 1
2031
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
20
Dec 31
2031
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
21
Jan 1
2032
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
21
Dec 31
2032
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
22
Jan 1
2033
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
22
Dec 31
2033
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
23
Jan 1
2034
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
23
Dec 31
2034
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
24
Jan 1
2035
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
24
Dec 31
2035
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
25
Jan 1
2036
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
25
Dec 31
2036
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
26
Jan 1
2037
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
26
Dec 31
2037
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
27
Jan 1
2038
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
27
Dec 31
2038
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
28
Jan 1
2039
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
28
Dec 31
2039
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
29
Jan 1
2040
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
29
Dec 31
2040
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00

See chart on right
$1
$1
$1
$1
$0
$0
$0
10
12
14
16
18
20
22
Year
Lease Obligation
Carrying Value
24
26
28
P12-17 EOY
End of Year Payment Model

Model Inputs:
Summary Statistics:
Payment
$1.00
Discount Rate
1.0%
Years to Maturity (0-30)
Total Lease Expense
$1.00
$0.99
$0.01
See chart on right

Amortization Table
Payment
Interest
Starting
Reduction
Ending
Straight
Depreciated
on Unpaid
Lease
of Lease
Lease
Line
Carrying
Obligation
Obligation
Obligation
Obligation
Amortization
Value
Date
Year
Jan 1
2011
$0.00
$0.00
$0.99
$0.00
$0.99
Dec 31
2011
$1.00
$0.01
$0.99
$0.99
$0.00
$0.99
$0.00
Dec 31
2012
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2013
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2014
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2015
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2016
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2017
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2018
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Dec 31
2019
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
10
Dec 31
2020
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
11
Dec 31
2021
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
12
Dec 31
2022
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
13
Dec 31
2023
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
14
Dec 31
2024
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
15
Dec 31
2025
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
16
Dec 31
2026
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
17
Dec 31
2027
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
18
Dec 31
2028
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
19
Dec 31
2029
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
20
Dec 31
2030
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
21
Dec 31
2031
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
22
Dec 31
2032
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
23
Dec 31
2033
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
24
Dec 31
2034
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
25
Dec 31
2035
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
26
Dec 31
2036
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
27
Dec 31
2037
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
28
Dec 31
2038
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
29
Dec 31
2039
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
30
Dec 31
2040
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.99

$1
$1
$1
$1
$0
$0
$0
0
12
16
20
Period
Lease Obligation
Carrying Value
24
28
C12-1
AMR Corporation: Constructively capitalizing operating leases
Discount
Rate
1.0%
Operating
Lease
Payment
PV of
Operating
Lease
Year
# of Years
discounted
2010
0.99010
$0.00
2011
0.98030
0.00
2012
0.97059
0.00
2013
0.96098
0.00
2014
0.95147
0.00
2015
0.94205
0.00
2016
0.93272
0.00
2017
0.92348
0.00
2018
0.91434
0.00
2019
10
0.90529
0.00
2020
11
0.89632
0.00
2021
12
0.88745
0.00
2022
13
0.87866
0.00
2023
14
0.86996
0.00
2024
15
0.86135
0.00
PV factor
$0.00
Discount
Rate
1.0%
Operating
Lease
Payment
PV of
Operating
Lease
Year
# of Years
discounted
2007
0.99010
$0.00
2008
0.98030
0.00
2009
0.97059
0.00
2010
0.96098
0.00
2011
0.95147
0.00
Thereafter
10
9.01162
0.00
PV factor
$0.00
C12-4
Walgreens: Lessee reporting and constructively capitalizing operating leases
Discount Rate
1.0%
Operating
Lease
Payment
Year
# of Years
discounted
PV factor
2010
0.99010
2011
0.98030
0.00
2012
0.97059
0.00
2013
0.96098
0.00
2014
0.95147
0.00
2015
0.94205
0.00
2016
0.93272
0.00
2017
0.92348
0.00
2018
0.91434
0.00
2019
10
0.90529
0.00
2020
11
0.89632
0.00
2021
12
0.88745
0.00
2022
13
0.87866
0.00
2023
14
0.86996
0.00
2024
15
0.86135
0.00
2025
16
0.85282
0.00
2026
17
0.84438
0.00
2027
18
0.83602
0.00
$0.00
PV of Operating
Lease
$0.00

Chap 012

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Chap 012

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Chapter 12

Financial Reporting for Leases

Assigned problem or case:

Problem or case title:

Accounting for lessees' capital leases

Accounting for lessees' capital leases

Recording lessors' direct financing lease

Accounting for monthly rental payments

Comparing financial statement effects of capital and operating leases

Comparing financial statement effects of direct financing and operating leases

Visualizing the asset-liability relationship over time for a capital lease

AMR Corporation: Constructively capitalizing operating leases

Walgreens: Lessee reporting and constructively capitalizing operating leases

Accounting for lessees' capital leases

Total Lease Expense

Total Depreciation Expense

Total Interest Expense

Lease Obligation vs. Book Value of Asset

Book value of asset

Accounting for lessees' capital leases

Total Lease expense

Total Depreciation expense

Total Interest expense

Lease Obligation vs. Book Value of Asset

Lease Obligation vs. Book Value of Asset

Period (as of January 2)

Requirement A2: Amortization table

Requirement B2 - Financial statement effects - capital lease

Lease obligation - Long term

Requirement B3 - Financial statement effects - operating lease

Difference in net balance sheet effect

Difference in income statement effect

Recording lessor's direct financing lease

Total Lease Payments Receivable

Unearned Interest Revenue

P12-12 Accounting for monthly rental payments

Requirement 1: Monthly payment

Requirement 4: Amortization table

(2.07) 2012 reductions

Comparing financial statement effects of capital and operating leases

Total Lease Expense

Total Amortization Expense

Total Interest Expense

Effect, Capital Lease

Income Statement Effect, Capital vs. Operating Lease

Expense, Operating Lease

Comparing financial statement effects of direct financing and operating leases

Total Lease Payments Receivable

Unearned Interest Revenue

Direct Financing Method Versus Operating Method:

Operating Method Income

Direct Financing Method Versus Operating Method:

Asset Balance, Operating Method

Visualizing the asset-liability relationship over time for a capital lease

Beginning of Year Payment Model

Years to Maturity (0-30)

Total Lease Expense

Total Amortization Expense

Total Interest Expense

See chart on right

Lease Obligation vs. Book Value of Asset

Visualizing the asset-liability relationship over time for a capital lease

End of Year Payment Model

Years to Maturity (0-30)