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When you book the capital lease, record the asset at its fair market value or the present value of minimum lease payments, whichever is less. The capital lease obligation is recorded at the same amount. Minimum lease payments include all rental payments required during the term of the lease plus any residual value guaranteed by the lessee. They also include any payment the lessee must make for not renewing or extending the lease, including a requirement to purchase the asset. They do not include any guarantee of the lessor's debt by the lessee, contingent rentals, or any penalty for which the term of the lease has been extended. They also do not include the portion of the rent payments which represent executory costs, such as insurance, taxes, and maintenance, and any related profit. The interest rate used to calculate the present value of the minimum lease payments is normally your incremental borrowing rate (the interest rate you would pay to borrow a similar amount of money for a similar length of time), unless you know the lessor's implicit interest rate for the lease and that is lower than your incremental borrowing rate. Sources: SFAS No. 13; RIA Checkpoint
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A lease of an asset for its entire productive life?
Lease which is done for the entire productive life of an asset is called "Capital lease or finance lease".
How do you record Obligations under capital lease contracts?
When you book the capital lease, record the asset at its fair market value or the present value of minimum lease payments, whichever is less. The capital lease obligation is recorded at the same amount. Minimum lease payments include all rental payments required during the term of the lease plus any residual value guaranteed by the lessee. They also include any payment the lessee must make for not renewing or extending the lease, including a requirement to purchase the asset. They do not include any guarantee of the lessor's debt by the lessee, contingent rentals, or any penalty for which the term of the lease has been extended. They also do not include the portion of the rent payments which represent executory costs, such as insurance, taxes, and maintenance, and any related profit. Sources: SFAS No. 13; RIA Checkpoint
In what circumstances is a capital lease a better alternative to an operating lease and under what circumstances is a clapital lease a better alternative than buying an asset?
1) When you do not need a current tax deduction, a capital works better, you can take depreciation over the term of the lease. 2) You buy a appreciating asset and lease a depreciating asset, A capital lease is better with a depreciating asset. http://www.equipmentleasing101.com
What is the Difference between sales type lease and capital lease?
Capital lease is that lease in which assets are acquired for substantial useful life of asset for use in business. Sale type lease is that in which discounted cash flow for miminum lease payment is higher than value of leased asset and only relevant to lessor.
How do you account for a capital lease on a cash flow statement?
capital lease is part of cash flow from investing activities and payment in this regard is shown in this section of statement.
What is lease obligation?
it is lease paid on capital invested
What kind of contract outlines the obligation of a landlord in his or her renters?
Is called a lease.
Capital lease and financing lease are the same thing?
Finance lease and operating lease are different things.
A lease of an asset for its entire productive life?
Lease which is done for the entire productive life of an asset is called "Capital lease or finance lease".
How do you record Obligations under capital lease contracts?
When you book the capital lease, record the asset at its fair market value or the present value of minimum lease payments, whichever is less. The capital lease obligation is recorded at the same amount. Minimum lease payments include all rental payments required during the term of the lease plus any residual value guaranteed by the lessee. They also include any payment the lessee must make for not renewing or extending the lease, including a requirement to purchase the asset. They do not include any guarantee of the lessor's debt by the lessee, contingent rentals, or any penalty for which the term of the lease has been extended. They also do not include the portion of the rent payments which represent executory costs, such as insurance, taxes, and maintenance, and any related profit. Sources: SFAS No. 13; RIA Checkpoint
How can an accountant determine whether a lease is a capital lease or operating lease?
If a copy of the lease agreement is made available to the accountant, this should be easily determined.
In what circumstances is a capital lease a better alternative to an operating lease and under what circumstances is a clapital lease a better alternative than buying an asset?
1) When you do not need a current tax deduction, a capital works better, you can take depreciation over the term of the lease. 2) You buy a appreciating asset and lease a depreciating asset, A capital lease is better with a depreciating asset. http://www.equipmentleasing101.com
What can happen if you stop paying your lease payment on your apartment halfway through the lease and you leave the apartment?
The landlord has an obligation to try to rent it. If she cannot, she can sue you for each month, through the end of the lease.
If I sign a lease but do not exchange money is the lease valid and do I have to move in the apt?
If you signed, the lease is binding. You don't have to move in, but you do have to pay the rent. The landlord has an obligation to try to rent the place, but until he does, you have to pay.
What is the Difference between sales type lease and capital lease?
Capital lease is that lease in which assets are acquired for substantial useful life of asset for use in business. Sale type lease is that in which discounted cash flow for miminum lease payment is higher than value of leased asset and only relevant to lessor.
What is capitalized lease obligations?
Capitalized lease obligations refer to lease agreements where the lessee records the leased asset as a capital lease on their financial statements. This means the lessee treats the leased asset as if it were purchased with a loan, and includes the lease payments as both an asset and a liability on their balance sheet.
Can a landlord go after my eighteen year old daughter if I default on my lease agreement?
Your daughter would have no legal obligation to pay the lease, unless her name is on the lease and she was over eighteen when she signed it. Otherwise the lease you signed is not enforceable against your daughter.
