Study sets, textbooks, questions
Upgrade to remove ads
ACCT 328 Purchases vs. Leases
Terms in this set (32)
a ___ is recorded as an asset on the balance sheet, while a ___ is not
because a purchase is recorded as an asset on the balance sheet, it reduces ___
a purchase recognizes ___ expense, while a lease recognizes ___ expense, both of which reduce ___ and ___
depreciation, lease (rent), accounting income, taxable income
in a ___, you must record borrowed funds to attain the asset as a liability, increasing your ___ ratio, ___ ratio, and ___
purchase, debt to asset, debt to equity, interest expense
in a purchase, payments are comprised of..
principal and interest
in a lease, payments are comprised of..
rent or lease expense
in a ___, expense charges associated with the lease are constant over its life, while in a ___, expense charges in the earlier years of the lease are higher
at the end of a ___, you are no longer responsible for the asset
in a purchase, you are responsible for the asset..
beyond its useful life
in a ___, you are responsible for defective assets, repairs, maintenance, etc.
in a ___, you can trade in old assets for new assets, and a renewed ___
a ___ has no big economic effect at the beginning, while a ___ does
For a lessee, if a lease is more like a purchase, it is a(n)...
For a lessee, if a lease is less like a purchase, it is a(n)..
To be a capital lease for a lessee, transaction must meet one or more of these requirements..
transfer of ownership, bargain purchase option, economic life test, recovery of investment test
Under what conditions would you depreciate a capital leased asset over its economic life?
transfer of ownership or bargain purchase option
If there is a transfer of ownership or a bargain purchase option, depreciate a capital leased asset over the ___ ___; if there is not, depreciate it over the ___ ___
economic life, lease term
for an operating lease, there is no ___ expense and no ___ liability
depreciation, long term
for the lessee, the recovery of investment test's discount rate is the lower of the ___ and ___ rate, while the lessor uses the ___ rate
incremental, implicit, implicit
for the lessor, the discount rate is always the ___ rate
economic life test - if lease is for ___% or more of the economic life of the asset, it is a capital lease
recovery of investment test - if the PV of the minimum lease payments is ___% or more of the fair value of the asset, it is a capital lease
recovery of investment test - the PV of minimum lease payments includes (1) the amount of ... (net ___ costs), (2) lessee .... , (3) penalties for failure to ___ or ___ the lease, and (4) the ... (if reasonably assured)
all future lease payments, guaranteed residual value, renew, extend, bargain purchase option
to find interest expense for a capital lease, use the same discount rate used to determine the...
PV of minimum lease payments
if a residual value is required, and the end value is ___ than that required residual value, must make up difference in ___
Lessor - the PV of ___ and ___ is the fair value of the asset
lease payments, recoverable (salvage) value
two types of leases for lessor: ___ and ___
two types of non-operating leases:
Lessor - when an asset's fair value at inception equals the lessor's book value, it is called a ____ lease
Lessor - when an asset's fair value at inception does not equal the lessor's book value, it is a ___ lease
Lessor - to be a non-operating lease, must meet one of TBER, and BOTH of the following: (1) ___ ___ ___ = reasonably predictable, (2) no important uncertainties about (a) ___ costs to the ___ (b) ___'s ability to perform or provide any ___ under the lease
collectability of payments, unreimbursable, lessor, lessor, obligations
for a lessor's TVM, the ___ is the plug value, to make sure that they get the percent of return desired
Recommended textbook explanations
Krugman's Economics for AP*
David Anderson, Margaret Ray
Principles of Economics
N. Gregory Mankiw
William A. McEachern
Principles of Economics
Sets with similar terms
Leases Multiple Choice
INT ACCT II-EXAM 2 (CH 15)
Intermediate Accounting Chapter 21
ACCT302 Ch15 Leases
Other sets by this creator
TAMU OCNG 251 Gardner Ch 15
TAMU OCNG 251 Gardner Ch 14
TAMU OCNG 251 Gardner Ch 13