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Financial Accounting
a. Operating leases.
b. Capital leases:
.without bargain purchase option
.with bargain purchase option
. With guaranteed residual value
a. Operating leases.
b. Capital leases:
.direct-financing leases
.sales-type leases
4. Leveraged lease.
A special three-party lease which is
considered to be a direct-financing lease.
of MLP.
* The asset is amortized over the lease term because the lease
does not include a transfer of ownership or a BPO.
Depreciate to zero due to no guaranteed residual value.
4. Payment on 12/31/96:
Interest Expense 9,489.19a
Obligation Under Cap. Lease 23,434.26b
Cash 32,923.45
1-Jan-95 - - - $100,000.00
31-Dec-95 $32,923.45 $12,000.00 $20,923.45 79,076.55
31-Dec-96 32,923.45 9,489.19 23,434.26 55,642.29
31-Dec-97 32,923.45 6,677.07 26,246.38 29,395.91
d
31-Dec-98 32,923.45 3,527.54 29,395.91 0
Total 131,694 $31,694 $100,000
Cash 32,923*
Lease Receivable 32,923
Unearned Interest 12,000
Interest Revenue 12,000
1996:
Cash 32,923
Lease Receivable 32,923
Unearned Interest 9,489
Interest Revenue 9,489
1997:
Cash 32,923
Lease Receivable 32,923
Unearned Interest 6,677
Interest Revenue 6,677
1998:
Cash 32,923
Lease Receivable 32,923
Unearned Interest 3,528
Interest Revenue 3,528
unearned revenue=0.
Cash 32,923
Lease Receivable 20,923
Interest Revenue 12,000
Accounting for Leases 83
Example A1-Lessor (5th Edition Method)
1996:
Cash 32,923
Lease Receivable 23,434
Interest revenue 9,489
1997
Cash 32,923
Lease Receivable 26,246
Interest Revenue 6,677
Equip. 112,635
Leased Equip. 112,635
Cash 500
Lease Receivable 500
Accounting for Leases 142
Other Comments Related to Sales-Type Leases
Capital Leases:
Lessee: reports cash flows for payments
toward interest exp. as cash flows from
operating activities and reports the payments
toward the principal (i.e., lease payable) as
cash flows from financing activities.
Accounting for Leases 146
Reporting on Statement of Cash Flows
(contd.)
Capital Leases (contd.):
Lessor: reports cash flows of the interest
portion as cash flows from operating
activities and the cash receipts toward the
principal portion as cash flows from
investing activities.