CHAPTER 21 Accounting for Leases ASSIGNMENT CLASSIFICATION TABLE BY TOPIC Topics Questions Exercises Problems Brief Exercises 1 Rationale for leasing 1 2 4 2 Lessees classification of leases accounting by lessees 3 5 7 8 14 1 2 3 4 5 3 Disclosure of leases 19 Concepts for Analysis 1 2 1 2 3 4 5 6 1 2 3 5 7 8 11 12 13 14 1 2 3 4 6 7 8 9 11 12 14 15 16 2 4 5 7 8 2 3 5 4 Lessors classification of leases accounting by lessors 5 6 9 10 11 12 13 6 7 8 11 4 5 6 7 9 10 12 13 14 1 2 3 5 10 16 2 4 5 Residual values bargain purchase options initial direct costs 15 16 17 18 9 10 4 8 9 10 6 Sale leaseback 20 12 15 16 6 7 10 11 13 14 15 5 6 7 8 This material is dealt with in an Appendix to the chapter 21 1 Copyright 2011 John Wiley Sons Inc Kieso Intermediate Accounting 14 e Solutions Manual For Instructor Use Only ASSIGNMENT CLASSIFICATION TABLE BY LEARNING OBJECTIVE Brief Exercises Exercises Problems Learning Objectives 1 Explain the nature economic substance and advantages of lease transactions 2 Describe the accounting criteria and procedures 1 2 3 4 for capitalizing leases by the lessee 3 Contrast the operating and capitalization 5 methods of recording leases 1 2 3 5 11 5 12 13 14 1 3 4 6 7 8 9 11 12 14 15 16 2 15 4 Identify the classifications of leases for the lessor 6 7 8 12 13 14 2 10 13 16 5 Describe the lessor s accounting for direct 6 7 4 10 5 financing leases 6 Identify special features of lease arrangements that cause unique accounting problems 9 10 8 9 4 9 11 12 7 Describe the effect of residual values guaranteed 9 10 3 and unguaranteed on lease accounting 6 10 11 13 14 15 16 8 Describe the lessor s accounting for sales type 11 6 7 1 3 10 13 leases 9 List the disclosure requirements for leases 3 4 5 7 8 10 Understand and apply lease accounting concepts to various lease arrangements 11 Describe the lessee s accounting for sale 12 15 16 leaseback transactions 21 2 Copyright 2011 John Wiley Sons Inc Kieso Intermediate Accounting 14 e Solutions Manual For Instructor Use Only Level of Difficulty Moderate Time minutes 15 20 ASSIGNMENT CHARACTERISTICS TABLE Item E21 1 E21 2 E21 3 E21 4 E21 5 E21 6 E21 7 E21 8 E21 9 E21 10 E21 11 E21 12 E21 13 E21 14 E21 15 E21 16 P21 1 P21 2 P21 3 P21 4 P21 5 P21 6 P21 7 P21 8 P21 9 P21 10 P21 11 P21 12 P21 13 P21 14 P21 15 P21 16 Moderate Moderate Description Lessee entries capital lease with unguaranteed residual value Lessee computations and entries capital lease with guaranteed residual value Lessee entries capital lease with executory costs and unguaranteed residual value Lessor entries direct financing lease with option to purchase Moderate Type of lease amortization schedule Lessor entries sales type lease Lessee lessor entries sales type lease Lessee entries with bargain purchase option Lessor entries with bargain purchase option Computation of rental journal entries for lessor Amortization schedule and journal entries for lessee Accounting for an operating lease Accounting for an operating lease Operating lease for lessee and lessor Sale leaseback Lessee lessor sale leaseback Simple Moderate Moderate Moderate Moderate Moderate Moderate Simple Simple Simple Moderate Moderate Simple Simple Moderate Lessee lessor entries sales type lease Lessee lessor entries operating lease Lessee lessor entries balance sheet presentation sales type lease Balance sheet and income statement disclosure lessee Moderate Balance sheet and income statement disclosure lessor Moderate Moderate Lessee entries with residual value Lessee entries and balance sheet presentation capital lease Moderate Lessee entries and balance sheet presentation capital lease Moderate Moderate Lessee entries capital lease with monthly payments Complex Lessor computations and entries sales type lease with unguaranteed residual value Lessee computations and entries capital lease with unguaranteed residual value Basic lessee accounting with difficult PV calculation Lessor computations and entries sales type lease with guaranteed residual value Lessee computations and entries capital lease with guaranteed residual value Operating lease vs capital lease Lessee lessor accounting for residual values Moderate Complex Moderate Complex Complex Complex 20 25 20 30 20 25 15 20 15 20 20 25 20 30 20 30 15 25 20 30 10 20 15 20 15 20 20 30 20 30 20 25 20 30 35 45 30 40 30 40 25 35 25 30 20 30 20 30 30 40 30 40 40 50 30 40 30 40 30 40 30 40 21 3 Copyright 2011 John Wiley Sons Inc Kieso Intermediate Accounting 14 e Solutions Manual For Instructor Use Only ASSIGNMENT CHARACTERISTICS TABLE Continued Item CA21 1 CA21 2 CA21 3 CA21 4 CA21 5 CA21 6 CA21 7 CA21 8 Description Lessee accounting and reporting Lessor and lessee accounting and disclosure Lessee capitalization criteria Comparison of different types of accounting by lessee and lessor Lessee capitalization of bargain purchase option Lease capitalization bargain purchase option Sale leaseback Sale leaseback Level of Difficulty Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Time minutes 15 25 25 35 20 30 15 25 30 35 20 25 15 25 20 25 21 4 Copyright 2011 John Wiley Sons Inc Kieso Intermediate Accounting 14 e Solutions Manual For Instructor Use Only SOLUTIONS TO CODIFICATION EXERCISES CE21 1 Master Glossary a A bargain purchase option is a provision allowing the lessee at his option to purchase the leased property for a price that is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable that exercise of the option appears at lease inception to be reasonably assured b The incremental borrowing rate is the rate that at lease inception the lessee would have incurred to borrow over a similar term the funds necessary to purchase the leased asset This definition does not proscribe the lessee s use of a secured borrowing rate as its incremental borrowing rate if that rate is determinable reasonable and consistent with the financing that would have been used in the particular circumstances c Estimated residual value is the estimated fair value of the leased property at the end of the lease term d Unguaranteed residual value is the estimated residual value of the leased property exclusive of any portion guaranteed by the lessee or by a third party unrelated to the lessor A guarantee by a third party related to the lessee shall be considered a lessee guarantee If the guarantor is related to the lessor the residual value shall be considered as unguaranteed CE21 2 According to FASB ASC 840 10
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