Exam 18: Extension: Ol Accounting for Leases Current Standard

If a lease transaction is in essence a purchase of an asset with the issuance of debt, then the lessee records both the asset and the liability on the balance sheet.

Initial direct costs are capitalized as part of the lease receivable with ________.

Under U.S. GAAP, a lease is classified as a capital lease if the leased asset is of such a specialized nature that only the lessee can use it.

If a capital lease contains a bargain purchase option, the depreciation period that is used by the lessee for the asset is ________.

Mega Corporation leases machinery on January 1, 2016. The lease is for a period of 7 years, which is the useful life of the machinery. The implicit rate of interest is 10% and the Obligation under Capital Lease is recorded at $48,197. The lease requires annual payments of $9,000, with the first payment due at the inception of the lease. How much interest expense should be accrued on December 31, 2016?

How does a bargain purchase option differ from a guaranteed residual value when considering depreciation?

Compare and contrast the major types of leases from the point of view of the lessee under GAAP.

StatMed Corporation leases medical equipment under a five-year capital lease. The terms of the lease call for five equal payments of $21,000, with the first payment due at the inception. The interest rate implicit in the lease is 10%. At what value is the leased equipment recorded at the inception of the lease?

The party acquiring the use of a leased asset is the lessor.

Sumner leases equipment to Butler Corporation. Butler records the first payment as prepaid rent. This implies that the lease ________.