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About this document
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- 6 pages
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- Format
- Subject
- Accounting
- Module
- ACC 400 · Week 5
This assignment covers the application of SFAC No. 13 and lease classifications. It explains how to account for leases at their inception, determine expenses, and report lease transactions on a balance sheet. It is for Week 5 of the ACC 400 course.
What's inside
- Application of SFAC No. 13
- Conditions for capital leases
- Accounting for leases at inception
- Lease expenses and amortization
- Balance sheet reporting of leases
- Lease classifications for Doherty and Lambert Companies
Who it is for: Students taking the ACC 400 Accounting for Decision Making course, Week 5. (Undergraduate)
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Summary
Lease accounting and reporting are covered. Students get help with applying accounting standards and classifying leases.
Theoretical Basis for Capital Leases
Long-term leases that must be capitalized are discussed. Conditions for capital leases are listed. These include the lease term and the cost of the asset.
Accounting for a Lease
A company called Lani is used as an example. The document explains how to record the lease at its start. It also covers how to determine the amount to record.
Lease Expenses and Reporting
Expenses related to a lease are explained. The document shows how to report the lease on a balance sheet. It also covers how to document the leased item.
Lease Classifications
Criteria for classifying leases are given. Sales-type and direct financing leases are contrasted. Examples are given for different types of companies.
Key terms
- capital lease
- A long-term lease that must be capitalized by the lessee.
- SFAC No. 13
- A standard that requires certain long-term leases to be capitalized.
- amortization table
- A table that shows the principal and interest for each installment.
- sales-type lease
- A lease where the lessor is an equipment dealer.
- direct financing lease
- A lease where the lessor is not an equipment dealer.
- accrual accounting
- A method that includes economic events in the accounting period.
Questions this document helps with
- What are the conditions for a capital lease?
- How do you account for a lease at its start?
- What is the difference between a sales-type lease and a direct financing lease?
Summary written with AI from the document's text.
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