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[Debit] Asset Under finance lease xxxx

[Credit] Liability Under finance lease xxxx

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11y ago

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A rented building is not an asset. The lease hold improvements may be a depreciating asset (depending on the definitions in your area)


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Lease which is done for the entire productive life of an asset is called "Capital lease or finance lease".


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When a lease qualifies as a capital lease what is the cost basis of the asset acquired?

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 Capitalise the asset at net book value; i.e., state the asset at net book value in the balance sheet, charge the depreciation in the Income Statement.