Accounting Unit 8

· After reading the information on accounting for leases in Chapter 15 from your Intermediate Accounting text, use a Word or an Excel document to complete the following exercise and address the following problems:

o E 15-35, "Concepts; Terminology," page 883. 

§ This exercise focuses on lease concepts and terminology.

E 15–35

Concepts; terminology

• LO15–2 through LO15–8

Prepare the appropriate entries for the lessor from the beginning of the lease through the end of the lease term.

Listed below are several terms and phrases associated with leases. Pair each item from List A with the item from List B (by letter) that is most appropriately associated with it.

List A

List B

•    1. Effective rate times balance


•    2. Revenue recognition issues


•    3. Lease payments plus residual        value


•    4. Periodic lease payments plus        excess lessee-guaranteed residual value


•    5. PV of lease payments plus PV of        residual value


•    6. Initial direct costs


•    7. Rent revenue


•    8. Purchase option


•    9. Leasehold improvements


•  10. Cash expected to satisfy residual        value guarantee


•  11. Finance lease expense


•  12. Deducted in lessor’s computation of        lease payments


•  13. Title transfers to lessee


•  14. Contingent rentals

1. PV of purchase option exercise price


2. Lessor’s net investment


3. Lessor’s gross investment


4. Operating lease


5. Depreciable assets


6. Component of lease payments


7. Nonlease payments


8. Depreciation longer than lease term


9. Disclosure only


10. Interest expense


11. Control passed to lessee


12. Lessee’s lease payments


13. Might shorten lease term


14. Sales-type lease selling expense

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Using Internet resources or the Capella University Library, research and write an essay on the importance and challenges of minimizing working capital. Your paper should be 4–6 pages in length and include three outside references. Your writing should be well organized and clear. Writing structure, spelling, and grammar should be correct as well.