contractual‚ periodic‚ tax deductible payments. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy‚ and can be for a fixed or an indefinite period of time (called the term of the lease). The consideration for the lease is called rent. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred
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CHAPTER 21 Accounting for Leases ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Brief Exercises Topics Questions *1. Rationale for leasing. 1‚ 2‚ 4 *2. Lessees; classification of leases; accounting by lessees. 3‚ 5‚ 7‚ 8‚ 14 *3. Disclosure of leases. 19 *4. Lessors; classification of leases; accounting by lessors. 5‚ 6‚ 9‚ 10‚ 11‚ 12‚ 13 6‚ 7‚ 8‚ 11 *5. Residual values; bargainpurchase options; initial direct costs. 15‚ 16‚ 17‚ 18 *6
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CHAPTER 15 LEASES Overview In the previous chapter‚ we saw how companies account for their long-term debt. The focus of that discussion was bonds and notes. In this chapter we continue our discussion of debt‚ but we now turn our attention to liabilities arising in connection with leases. Leases that produce such debtor/creditor relationships are referred to as capital leases by the lessee and as either direct financing or sales-type leases by the lessor. We also will see that some leases do not
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on Leasing vs. Purchasing The benefits of leasing Computer equipment vs. purchasing Summary The company needs to upgrade its computer equipment. There are two upgrade paths to consider. In this proposal‚ we demonstrate how equipment leases take advantage of the benefits of reduced depreciation and taxation‚ easy scalability‚ reduction of IT staff usage‚ reduced energy costs‚ and reduction of capital spending. The company can free up money overall and maintain better control of the
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to classify a lease that Lessee‚ Ltd. acquired from Lessor Inc. The accounting standard that deals with leases under IFRS is IAS 17. IAS 17 was originally issued in September 1982 and was reissued in December 2003. It classifies leases as either finance leases or operating leases. Finance leases make it so that the lessee recognizes an asset and a liability and the lessor recognizes a receivable‚ basically transferring all the risks and benefits of ownership. Under operating leases‚ the lessor still
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1. INTRODUCTION In order to start and sustain a business one needs finance. In the unit one on feasibility study. It’s included in the process of estimating financial requirements. The process involved:- a) Making a list of all the assets b) Identifying the sources of supply c) Estimating the cost of acquisition when the assets are to be acquired on outright basis. Then investment requirements as well as entrepreneur’s fear will increase. To scare away the entrepreneur’s fear‚ the emphasis
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Matthew Ponzurick Accounting 305-001 Spring 2013 Chapter 21 Summary Leasing Environment Many companies these days choose to lease buildings or certain structures rather than owning them because there is more money involved in leasing a property. In 2010 521 billion dollars were made through leasing properties. The question to answer is what type of equipment may be leased‚ and the answer is any type of equipment is allowed to be leased. For example; railcars‚ helicopters‚ bulldozers‚ barges
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Starbucks classifies its leases on retail stores‚ roasting and distribution facilities and office space as "operating leases." FASB Standard No. 13 says that a lease may be classified as an operating lease only if it meets the following four criteria: the lease life does not exceed 75% of the estimated life of the asset‚ there is not a transfer of ownership to the lessee at the end of the lease term‚ there is not an option to purchase the asset at a "bargain price" at the end of the lease term‚ the present
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use of an asset is to lease it. Another way is to obtain outside financing and buy it. Thus‚ the decision to lease or buy amounts to a comparison of alternative financing arrangements for the use of an asset. Figure B.1 compares leasing and buying. The lessee‚ Sass Company‚ might be a hospital‚ a law firm‚ or any other firm that uses computers. The lessor is an independent leasing company that purchased the computer from a manufacturer such as Hewlett- Packard (HP). Leases of this type‚ in which
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makes one-time or periodic payments to the lessor in return for the use of the asset. The lease agreement is binding on both the lessor and the lessee‚ and spells out the rights and obligations of both parties. The lessor may grant special privileges to the lessee‚ such as early termination of the lease or renewal on unchanged terms‚ solely at his or her discretion. The lessor is also known as the landlord in lease agreements that deal with property or real estate. Investopedia explains ’Lessee’ The
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